UK 10% inflation rates are stretching consumer paychecks and patience

Amid soaring inflation and rising food and fuel prices, terms like financial literacy and managing expenses have become one of the biggest buzzwords in recent months.

The concept is simple. Sound spending habits and financial prudence can help protect households from unmanageable debt and ensure they have sufficient savings to protect against further economic shocks.

In the UK, for example, the Office for National Statistics recently announced that the consumer price index (CPI), a well-known indicator of inflation, jumped 10.1% over the year. through July, signaling double-digit inflation for the first time since 1982.

In these unprecedented times, it is therefore not surprising that financial literacy and household budgeting have become pressing issues, both on the national agenda and for consumers.

Read more: PYMNTS Intelligence: How Financial Literacy Affects Consumers’ Digital-First Banking Preferences

Early digital challenger banks such as Monzo, Revolut and Starling have stepped in by rolling out new features that help customers manage their money more efficiently. These smart tools were designed to give users a clear picture of their spending habits so they can save and budget using detailed expense reports.

Related: Revolut’s ‘Pockets’ tool aims to help people organize their payments

These digital banking apps can also provide notifications to help keep budgets on track, and bill management features like Revolut Pockets and Monzo Pots allow users to organize payments and allocate some of their monthly budget to recurring payments.

A difficult task awaits the next British Prime Minister

For Britons living on the subsistence level, no amount of budget is likely to fully absorb the impact of price hikes which have already led to the average UK grocery bill rising by £380. year-on-year (YoY).

Read more: UK shoppers feel pressured as average annual grocery bill rises by £380 a year

But to provide some relief, the country’s Department for Work and Pensions (DWP) took the initiative last month and made the first installment of a two-part payout to recipients of means-tested benefits and disability, as well as retirees. Eligible citizens received a direct bank transfer of up to £326 ($384), with a second payment expected in the fall.

See more : UK government to pay $43.6 billion to support households

However, more will be needed to help struggling UK households keep their heads above water, and sound financial management will become increasingly important in the months ahead.

This is all the more critical as households are set to come under intense pressure this autumn due to rising energy bills that will drive inflation above 13%, according to Bank of England estimates. (BoE).

The BoE also expects the UK to slip into recession in the fourth quarter of 2022, while unemployment is expected to rise in 2023 as the bank pursues monetary policies to bring inflation back to its 2% target.

Amid this looming recession and with the BoE playing a delicate balance between controlling inflation and unemployment, Britain’s next prime minister has a tough job.

In fact, the UK’s cost of living crisis has come to dominate the ongoing Tory leadership election that will determine Britain’s next prime minister, with rivals Rishi Sunak and favorite Liz Truss offering competing visions on how best to manage the country’s financial difficulties.

Learn more: Crypto champion Sunak faces digital internationalist group in UK leadership race

But no matter how the race plays out, questions about how to fund the proposed tax cuts and whether or not the government will commit to spending more to help cover the price spike will need to be answered urgently by anyone. will take the helm of British diplomacy and move into 10 Downing Street next month.

For all PYMNTS EMEA coverage, subscribe daily EMEA Newsletter.