Household saving is expected to fall by 71 per cent on last year, to an average of £26 a week. The news comes as inflationary pressures drastically reduce families' ability to put money away, figures suggest.
Households would need to earn an extra £80 a week before tax or spend £66 less to save at the same level as in the second quarter of last year, according to estimates by Scottish Friendly and the Centre for Economics and Business Research (Cebr).
Kevin Brown, savings specialist at Scottish Friendly, said: "Household savings are set to fall well below pre-pandemic levels in the second quarter of this year as Brits' take-home pay drops and their outgoings rise.
"The 1.25 percentage point hike in national insurance contributions and the freezing of income tax bands couldn't be happening at a worse time for families. This will squeeze people's take-home pay while the new energy price cap will drastically increase many households' energy bills.
"As a result, households' ability to save and invest is going to be severely reduced in the short-term. Not only are people going to be able to put away less money, but they may also have to rely on existing savings to maintain their normal standard of living.
"Eventually, inflation will ease and wages will rise, which will allow more households to re-engage their savings, but for now it's a case of cutting costs wherever's needed to make ends meet."
Household spending this month is expected to be 12 per cent higher than during the same month last year, driven by the 54 per cent increase to Ofgem's price cap and new tax policies, according to the study.
As a result, average weekly saving is expected to fall from £41 in March to as little as £27 in April, and £26 in May and June.
Household saving soared during the pandemic and peaked in the first three months of 2021 with the average household saving £152 a week. Saving levels have fallen every quarter since then, but they are expected to recover from the third quarter of this year onwards, as inflationary pressures ease and wage growth improves.
A survey of more than 2,000 UK adults as part of the study found that 72 per cent expect that rising prices will worsen their living standards over the coming year. Among them, 24 per cent expect that their living standards will fall "significantly".
The most widespread impact of the cost-of-living crisis is expected to be on consumer shopping habits, with 50 per cent of respondents expecting to have to change the type of goods and services they buy. Meanwhile, 34 per cent say they will have to change where they shop, nearly one in five will seek new income sources, and 19 per cent will draw upon existing savings.
"We are committed to supporting savers of all income levels and at all stages of life," said an HM Treasury spokesman. "To make sure people keep more of what they earn we've cut the universal credit taper rate for lower income households, giving 1.7 million households an average extra £1,000 a year.
"We have increased the amount people can save without paying tax to £20,000 per year for Isas and increased the personal savings allowance for basic rate taxpayers to £1,000 and to £500 for higher rate taxpayers - allowing 95 per cent of people with savings income to pay no tax on that income.
"We are also boosting the incomes of the lowest paid through a rise in the national living wage, meaning an extra £1,000 a year for a full-time worker and have increased national insurance thresholds, saving a typical employee over £330 a year."
3Gem surveyed 2,000 UK adults between February 14 and 20.
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