British workers save just 1% of their pay as living costs continue to outpace income

The latest Vanquis Financial Wellbeing Index (Q4 2022 – Q4 2024) shows that despite rising incomes, workers earning up to £40,000 a year are seeing financial gains eroded by surging essential costs. Over two years, household bills have risen 23%, groceries 12%, and insurance costs 52%, leaving many financially exposed, with just 1% of income going into savings.

Despite these pressures, discretionary spending on retail, out of home costs and entertainment and leisure remains remarkably resilient, highlighting the trade-off between financial pressure and maintaining quality of life.

"While incomes are rising, the relentless increase in essential costs is preventing many from building a financial cushion," said Ian McLaughlin, Vanquis CEO. "This leaves households vulnerable to unexpected expenses and financial shocks. The challenge is turning small financial wins into long-term security. That means staying mindful of affordability, building good savings habits, and drawing on the right financial support at the right time.”

Key data findings from the Vanquis Financial Wellbeing Index:

• Workers have experienced improved financial balances over the quarter, as income growth outpaces or closely matches rising expenses
  • 2.9% income v expenses surplus, up from a -2.8% deficit in Q3 2024
• Rising expenses continue to challenge financial stability, with essential spending costs having grown 1% on the quarter, 10% year-on-year and 15% across the past two years.
• 58% of income is allocated to essential expenses, including mortgage, rent, insurance, council tax, energy and water bills
• Discretionary spending remains surprisingly resilient led by spending on retail, out of home costs and entertainment and leisure
• As a result, savings remain crucially low at just 1% of income

 The human impact

While some financial indicators show improvement, many workers are still feeling the strain:

• Financial stress: 44% said their financial situation affected their mental wellbeing in January—little change from 42% in October
• Missed bill payments: In October, 16% expected to miss a bill in the next three months. By January, 21% had missed at least one
• Working longer hours: 44% have had to work more hours to make ends meet
• Second jobs: In October, 29% thought they might need a second job; by January, 32% had taken one
• Budget grocery choices: 63% of lower earners are buying more own label products vs. 56% of higher earners
• Switching stores: 60% of lower earners have moved to cheaper supermarkets vs. 47% of higher earners

Mintel - Consumer Financial Wellbeing Survey on behalf of Vanquis - 2025¹

Vanquis will continue to track the financial resilience of workers earning up to £40,000, with the next Financial Wellbeing Index set for release in May 2025.

Read the Vanquis Financial Wellbeing Index here.