A study of 2,000 adults found nearly eight in 10 (77 per cent) are ‘concerned’ about rising inflation and the impact it’s having on their bills and day-to-day living expenses.
And 55 per cent have already tried to offset rising costs by giving up luxuries or reducing non-essential spending, including eating out, new clothes and takeaways.
Inflation rose to 5.4 per cent in December – a 30-year-high – and is predicted to hit as much as seven per cent this year, leaving millions with higher bills for food, clothes and other living costs.
Rising energy costs mean bills are also on the up, and many face a planned National Insurance hike in the coming months.
To help combat rising inflation, the Bank of England has increased the base rate to 0.5 per cent, and while helpful for some, this also means homeowners not on a fixed rate deal are facing higher mortgage payments.
Understanding how inflation is moving
Now, savings and investment app Moneybox has created an Inflation Time Machine to help people get to grips with how inflation could affect their individual monthly outgoings.
It also aims to help them feel better prepared when considering what they can do now to offset the impact of inflation over time.
It comes after the study also found 39 per cent of adults are looking to plan ahead with their finances to ensure they can maintain their current lifestyle in the future despite the rising living costs.
And 32 per cent feel it is more important than ever to grow their money for the future, with 18 per cent trying to be braver with their savings and investments.
Charlotte Oates, a spokesperson from Moneybox, said: “For many, this will be the first time they’ve seen a significant increase in inflation, so it’s understandable there’s growing anxiety and uncertainty regarding the cost of living.
“The trouble with inflation is that it’s often only felt once your money has been spent, and you realise it isn’t stretching as far as it used to.
“The Inflation Time Machine will help give you a clearer picture of how you might be affected, so you can plan ahead and still make progress towards achieving your financial goals this year and in the years to come.”
The study also found that among those fortunate enough to have some money to spare, 25 per cent are looking to Stocks and Shares ISAs to grow their money.
Nearly a third (32 per cent) are exploring wider investing opportunities including individual stocks or opening a General Investment Account and 14 per cent are open to investing in cryptocurrency.
Others are planning to invest in property (17 per cent), put money into a Lifetime ISA (nine per cent), Premium Bonds (22 per cent) or a fixed rate cash ISA (19 per cent).
Energy bills are set to increase drastically
The study also found that currently, the average adult spends £270 on food each month and £148 on gas and electricity.
However, this looks set to rise after regulator Ofgem increased the energy price cap, which means many could see their energy bills increase by around 50 per cent.
A further £46 a month is spent on their water bill, while £116 is spent on fuel or transport, and £50 goes on their mobile phone.
When it comes to luxuries, £50 is splashed out on nights out while an average of £41 is spent on takeaways each month.
On average, Brits also try to save or invest nearly a fifth of their monthly income.
A savvy 78 per cent are already making changes to their spending to try and offset the rising cost of living, with 36 per cent simply spending less on the things they don’t need.
Nearly three in 10 (28 per cent) are budgeting more while 25 per cent are trying to put more away into their savings.
Others, polled via OnePoll, are selling things they don’t need (23 per cent), going out less (22 per cent) and shopping second hand (17 per cent).
Charlotte Oates added: “Inflation can impact everything, from increasing the price you pay for essentials to de-valuing your hard-earned cash savings.
“To make your cash savings grow over time, the interest rate needs to be higher than the rate of inflation. If it’s not, you’re losing money in real terms.
“If you already have a rainy-day fund set aside, and you're looking to the long term, investing is one of the best ways to grow your money over time and offset the impact of inflation.
“We hope our tool will encourage people to take some time to consider their options and feel ready to face the coming months and years with greater financial confidence.”
Top ways to offset rising costs
1. Spend less on things you don’t need
2. Budget more
3. Put more away in savings
4. Sell things you don’t need
5. Go out less
6. Shop second hand
7. Find a hobby that generates a second income
8. Invest money in stocks and shares
9. Look for a new job
10. Open a savings account
11. Ask for a pay rise
12. Speak to a financial advisor
13. Use an app to track spending
14. Invest money in cryptocurrencies
15. Go for a promotion