With rising living costs, disposable incomes are being squeezed and Brits are being forced to dip into their savings built up over Covid lockdowns and restrictions.

Data from money management app Plum revealed that on average, the total amount saved by 500,000 customers in January 2022 fell by 39% year-on-year.

This is despite an increase in the average amount of money deposited (8%) in the year to January 2022.

In a separate survey, Plum found that a third (32%) of families do not have any rainy-day savings.

Just a quarter of the 2,000 polled said they have a ‘healthy’ pot of money saved, while 43% said they have a small amount set aside.

As inflation’s soared to a 30-year high, savers have reacted by changing how much and how regularly they save.

Plum found that 13% have reduced payments into their savings accounts, 12% have switched from making regular payments to depositing money ad-hoc, while 11% have paused or cancelled their regular savings.

However, the most common savings goals are to build up a rainy-day fund (44%), for a holiday (20%) and 15% say it’s for home improvements.

Victor Trokoudes, CEO & co-founder of Plum, said: “Households’ propensity to save as much of their income as possible, a habit many adopted during the pandemic, is beginning to wane.

“Living costs are now substantially higher than they were a year ago and disposable incomes are being squeezed.

“As families tighten their belts, it’s understandable that may will want to temporarily cut back how much they regularly save. But putting money aside now to prepare for higher bills when they do come, is more important than ever.

“Clearly, saving for a rainy day is important but for those with a buffer already in place the focus is on building up a pot of money with a specific goal in mind. If this means saving for the long-term, for example at least five years, people should consider investing their money instead.”