Cost of living, debt: House, food, petrol prices rising as majority already living beyond means

More young people have given up on home ownership as house prices have continued to rise in the past year .Photo / 123RF

As Kiwis face rising food and petrol prices, many are already living outside their means, new research has revealed.

A study canvassing the views of 18,000 Kiwis over the past year by research and financial product comparison firm Canstar has revealed New Zealanders' biggest financial worries, poor savings habits and the rising number of those who have given up on owning their own home.

Canstar New Zealand general manager Jose George said: "This report reveals so much about how we've been managing our finances in such a fast-moving time. It'll be fascinating to see how this changes given the dramatic era we are living through."

Unsurprisingly, the financial impact from Covid-19 remains the biggest financial concern (15 per cent), but that is now closely followed by grocery prices (14 per cent).

The percentage of those worried about house prices has fallen to 9 per cent.

But while rising grocery prices are a worry, 58 per cent of those questioned admitted to spending more than they earn, and it's even more of an issue for younger people: 65 per cent of those under 40 say their spending exceeds their income.

Older people were slightly better at managing their finances, but still 40 per cent of over 70s said they spent beyond their means.

"The responses are a brutal reminder of the struggles many New Zealanders face keeping up with the cost of living on wages that are falling far behind inflation.

"Furthermore, our poor savings record means we have limited cash reserves, which increases the pressure on households that are falling behind their incomes," the report noted.

While many households were able to squirrel away some money in 2020 as lockdowns prevented many from spending, by mid-2021 this had reversed, and household savings sank into negative territory again.

The research found 23 per cent of those surveyed don't save anything each month, 22 per cent saved up to 10 per cent and 15 per cent saved between 10 and 20 per cent.

And the pandemic has hit many in the pocket: 38 per cent say it has left them worse off financially.

Of those who are saving, the biggest percentage (18 per cent) are saving for an international holiday, while 14 per cent are saving for a domestic holiday. A new car and home renovations are also saving priorities.

Debt rise

The research also revealed as Kiwis are struggling to save as many are also racking up debt.

Excluding mortgage debt, only 45 per cent say they are debt-free. The average sum owed is just over $23,000.

Aucklanders and those in their 30s were likely to owe more, with an average debt of $34,000 (excluding mortgages).

One in five of those with debt say they always miss payments although most (85 per cent) believed their debts were manageable.

The research also revealed a bleaker picture for first-home buyers. More than a third of those in their 40s looking to buy in early 2021 had changed their mind by January this year.

Half of those hoping to get on the property ladder believed they could save a deposit in two to four years at the start of 2021, but that had shrunk to 39 per cent at the start of 2022.

Those who believe it will take more than a decade rose from 5 per cent to 8 per cent over the year.

"This reflects the massive challenge Kiwis face in raising a deposit in an environment of high inflation and soaring house prices."