Falling inflation drives consumer shift to saving more
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As inflation concerns among consumers continue to recede, attitudes towards savings and investments have changed dramatically, with more people feeling it is an opportune time to put more money away, a new survey by Bank of Ireland shows.
According to Bank of Ireland’s Savings and Investment Index, saving and investing sentiment continues to recover, with the overall index rising to 94 during the last three months — up from 83 in July.
The savings section of the index was up to 95, while the investment section was up to 93.
The index tracks household attitudes towards savings and investments as well as monitoring their perspectives on current and future savings and investment environments.
The index scores are based on a survey of a nationally representative sample of 1,000 consumers conducted by Ipsos B&A. The survey asks participants a series of questions such as whether they save or invest, if so how much, and whether they consider it a good time to save or invest.
This feedback is then used to generate index’s scores.
On savings, Bank of Ireland said consumer attitudes changed “dramatically” this quarter, with four in 10 people saying now is a good time to save compared to one in four in August 2023.
The bank suggests this increase was partly driven by higher deposit savings rates being available.
On the investing side, three in 10 people see now as a good time to invest, compared to just over one in five in August 2023.
The incidence of individuals investing has also increased, and 61% now say they need to invest more than they currently do.
The index also showed changes in what is concerning Irish households at the end of 2024.
Concerns over inflation, which has dominated the index for the last three years, has reached its lowest level, with just 18% citing it as their primary concern — compared to its peak of 33% in February 2023.
Housing and cost of rent concerns fell slightly to 16% from its peak of 19% in May 2023.
Conflicts such as the Middle East and Ukraine are prominent, cited by 28% of people as their main concern, while worries about global recession increased to 12%, doubling from 6% in July this year.
Chief investment strategist at Bank of Ireland Kevin Quinn said it was clear cost of living “remains a prominent concern for a great deal of families in Ireland and the overall increase in prices over those years remains an enormous problem for many”.
“However, this is the first time we’ve seen the fall in the inflation rate begin to influence how people are thinking about their savings and it was a considerable change in our most recent survey results.”
In terms of investing, Mr Quinn said the increase was driven by the “dual impact of falling inflation and the experience many have had of an exceptional period of strong returns”.
“While inflation in Ireland has been falling since late 2022, it took until August 2023 before we saw a turning point for all the sentiment and attitudes tracked by our Savings and Investments Index, and they continue to improve,” he said.