Average living costs for consumers have risen by £2,600 in a year, according to the LV= Wealth and Wellbeing Monitor.

A quarter of those surveyed said their monthly living costs were £250 or higher than a year ago.

Rising living costs have led to those surveyed adopting a variety of methods to make ends meet.

A quarter (23%) are dipping into their savings, 34% are buying cheaper brands, 30% are having fewer holidays and meals out, and 5% are paying less into their pension.

A further 5% have cancelled some insurance policies and 8% are taking on more credit card debt and loans.

Inflation is also eroding the value of consumers’ savings, but many are unprepared to move their savings into investments in order to increase their value.

A third (31%) of those surveyed were considering moving, or have already moved, money into high-risk investments to achieve more long-term growth.

Two thirds (63%) said they would avoid moving money into higher-risk investments due to worries about volatility.

Many were also unaware how inflation affects their savings.

A quarter of those surveyed were unaware that inflation can reduce the value of savings if inflation is greater than the interest rate on their savings.

Younger savers were less likely to understand the impact of inflation on savings. Over a third (34%) of 18 to 34 year olds did not understand the impact of inflation on savings in comparison to 14% of over-65s.

Clive Bolton, managing director of savings and retirement at LV=, said: “One of the big issues people now face is how to also protect the future spending power of their savings being eroded by rising prices. This is especially true if they keep their money in savings accounts and are reluctant to invest in what have typically higher returning stock-market investments because they fear volatility.”

• The LV+ Wealth and Wellbeing monitor is a quarterly survey of over 4,000 UK adults.