Invisible spending costs the nation £48 billion a year

UK adults are spending £48 billion a year(1) through a habit of ‘invisible spending’, Aviva research has revealed.

  • Typical UK adult spends £948 a year on ‘invisible’ items
  • A 20-year-old could build a £136,000 pension pot by cutting back on these items
  • Almost half of UK adults admit they don’t keep track of all their spending

The term has been coined by the investment and retirement solutions provider to describe the small – almost invisible – amounts people spend on a regular basis without paying too much attention.

A study of 2,000 adults across the UK has discovered that on average each person spends £18.23 each week on items such as coffees, shop-bought lunches, post-work drinks and treats for children. Over a year this adds up to £947.96. And over a working lifetime – between ages 18 and 68 – this could stack up to a staggering total of £47,398 per person, before any potential inflationary increases are taken into account.

The research also shows that younger people are more likely to be the biggest ‘invisible spenders’, possibly because they have fewer demands on their cash and are less used to budgeting.

Age Average weekly amount ‘invisibly’ spent by age group
Aged 18-24: £21.17
Aged 25-34: £20.94
Aged 35-44: £19.36
Aged 45-54: £18.92
Aged 55-64: £15.54

This also demonstrates the potential for future savings if people were to cut back on these smaller items. For example, a 20-year old could build a pension pot of £136,000 if they were to invest £21.17 weekly.

The table below shows how these ‘invisible’ amounts could potentially grow over time, if invested in a pension(2):

Age started investing Weekly amount invested Pension fund at retirement Total amount available after tax
20 £21.17 £136,000 (at age 68) £105,000 (at age 68)
25 £20.94 £111,000 (at age 68) £88,000 (at age 68)
35 £19.36 £68,000 (at age 68) £58,000 (at age 68)
45 £18.92 £37,100 (at age 67) £33,000 (at age 67)
55 £15.54 £14,200 (at age 67) £14,000 (at age 67)

Seven out of 10 adults who spend on these items – such as chocolate bars and canteen cups of tea(3) – said they would be willing to give up or cut back on their spending in order to save more.

Although when asked what they would do with the money they saved, most people were focused on shorter-term goals rather than long-term investments. One in three (35%) said they’d put the money in a standard savings account, while a further third (34%) would leave it in their current account as additional disposable income. One in seven (14%) would put the money in a piggy bank, although 5% would invest in a pension.

Rodney Prezeau, consumer platform managing director for Aviva says: “When we buy a coffee or a snack, we often don’t give it a second thought, but it’s incredible how small change can really stack up over time. Our study found that 26% of people don’t really keep track of their spending at all, and a further 22% only keep an eye on larger purchases, so many of us may be surprised if we actually look at where our money is going.

“It’s interesting that most people say they’d be willing to cut back in order to save, but most people are focused on the short term. We’d encourage people to also think about how small savings can be utilised in the long term, for example in a pension or in an investment ISA. As our calculations show, even small amounts can make a big difference!”

A ‘cut back and save calculator can be found on the Aviva website, to enable people to see how much cash they can save by making small changes to their spending:  http://www.aviva.co.uk/savings-and-retirement/tools-and-calculators/cut-back-and-save-calculator.html

Aviva’s direct-to-consumer online platform is available to customers who want to self-manage their investments. The initial product range includes an investment account, ISA, and SIPP, with access to more than 2,000 funds, plus income drawdown functionality.

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