20 Nov 2024

Financial confidence has improved, but the cost of living casts a shadow

Although the cost of living crisis appears to be receding, people are still cautious about their current financial situation, says Standard Life’s latest report.

There is a welcome shift in the country’s financial mood.

The misery inflicted by the highest inflation in 30 years is receding, with levels of positivity at their highest since 2021.

However, the impact of the cost-of-living crisis is still felt.

People still feel cautious about their finances, with many concerned about meeting energy bills and budgeting for rising prices.

This goes across all income brackets, with high earners as likely to feel anxious as those on roughly average incomes.

And fewer people feel financially comfortable than last year, while more people are merely coping.

This is evident across all generations, but especially Gen Z.

These findings are from Standard Life’s Retirement Voice 2024 report, in which 6,000 people in the UK took part.

Figures show the percentage of those over the last four years who agree with the statement, ‘I feel positive about my financial situation.’

Improved financial wellbeing

Financial positivity among Millennials and Gen Z is at its highest point since 2021.

Baby Boomers+ remain consistently the happiest with their money. Gen X continue to be significantly less positive than other generations, but they’re also feeling better than they did last year.

Around half of men (52%) say they feel positive about their financial situation, compared with around four in ten women (43%).

Despite the increase in financial positivity, many people say the cost-of-living crisis has bruised their emotional wellbeing.

Gen Zers (61%) and Millennials (56%) are the most likely to agree that their mental health has suffered because of the ongoing economic uncertainty. The singularly most affected appear to be Gen Z women (67%).
Having a higher household income does not appear to fully shield people from the stresses caused by the cost of living.
In fact, those with household incomes over £100,000 are almost as likely to say their wellbeing has been negatively affected by the cost-of-living crisis as those on incomes of £30,000–£50,000.
Baby Boomers+ (24%) are by far the least likely to say they’ve felt stressed.

Figures show the percentage of those who agree with the statement, 'The current cost of living issues have impacted my mental health or made me feel stressed.'

Just coping

While the financial gloom shows signs of lifting, the number of people who would describe their financial situation as ‘comfortable’ is falling year on year.

Gen Z has seen the biggest change over the last three years.

Only 23% of this generation now describe their financial situation as ‘comfortable’ – compared with 41% a year ago.

Meanwhile, Gen Xers are the least likely to say they feel financially ‘comfortable’.

At the same time, there’s been a small decline in the number of people who are finding their financial situation ‘difficult’, compared to last year (24% vs. 27%).

This is largely due to improvements among the two older generations.

Financial worries

When we look at what’s driving financial stresses, energy costs and inflation appear to be the most pressing concerns.

Two-thirds of people across all generations are worried about meeting their energy bills (69%) and coping with rising prices (66%). Less than half (45%) say they are troubled by the turmoil in the financial markets, and just a third (35%) have concerns over interest rates.

There are large generational differences. Gen Zers and Millennials are much more worried about interest rates and market instability than older generations.

The same is true, albeit to a lesser extent, with inflation.

This perhaps reflects younger people’s concerns about mortgages and rent.

However, Baby Boomers+ (64%) and Gen X (71%) are very worried about energy costs – perhaps pointing to the fact that the cost of running their homes is more of a concern than buying one, as it would be for younger groups.

Benefits of planning

While the report identifies some cause for concern, it also points to opportunities for employers to support their workforce when they need it most.

Crucially, the research finds that planners benefit from greater financial wellbeing – across all income groups.

The findings also show that most of those who take professional advice feel better as a result, and believe that it represents value for money.

Download the Retirement Voice 2024 report.