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A quarter of households have no savings… and a fifth can’t last a month if the main breadwinner can’t work, data shows
- Almost a third of households have stopped saving due to the cost of living crisis
- A quarter of households have no money set aside for emergencies
- In November, 11% of adults went hungry because they couldn’t afford enough food
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More than a fifth of households could not last a month without running into financial difficulties if the main breadwinner is unable to work, new figures show – and a quarter have no savings at all.
The findings from insurer Direct Line show that nearly a third (32 percent) of households have stopped saving because of the rising cost of living, with a quarter (25 percent) saying they have no money set aside for emergencies.
Almost half of those who do have a piggy bank (47 percent) say they have now stopped using it.
Inflation is said to have peaked, but experts warn it will take time for prices to fall
And of those without savings, two-thirds would be in financial trouble within a year if the main breadwinner is unable to work.
Inflation reached a 41-year high of 11.1 percent in October, before falling slightly to 10.7 percent in November.
While prices are expected to fall throughout the year, there are fears that price increases in the UK could prove more persistent than elsewhere in the world, leaving household finances under pressure.
>> Will the cost of living go down in 2023?
Vincent Guadagnino of Direct Line life insurance, said: ‘Millions of households would be in an incredibly vulnerable position if the household’s main breadwinner were out of work, and the impact would be felt in an incredibly short time.
“For many households, the impact would not be measured in months, but in a few short weeks.
“It’s important that households consider what safety nets are available and whether they can reorganize their finances to provide greater protection should the worst happen.”
Further data shows that it is the most vulnerable who are at risk. Nine in ten lowest-income households are experiencing poor or very poor financial resilience, according to the latest edition of the Savings & Resilience Barometer, published by asset manager Hargreaves Lansdown and Oxford Economics.
They are hardest hit because they spend the majority of their income on basic necessities – things like food, fuel and energy – and the cost of these is twice that of non-essentials.
Hargreaves Lansdown said that while nearly a third of adults will have to cut back, save or borrow more this year to make ends meet, among lower-income earners this rises to 80 percent.
The cost-of-living crisis is having a greater impact on low-income earners, who are spending a higher proportion of their paychecks on basic needs
In November, 28 percent of adults said they couldn’t afford to eat balanced meals and 11 percent (up from 5 percent before the pandemic) reported feeling hungry in the past month because they didn’t have enough money to buy food, according to The Resolution Foundation.
Not-for-profit lender Fair for You also reported that demand for small loans tripled, with many clients in a “negative budget” where income is not enough to cover essentials.
However, according to Hargreaves Lansdown, middle income earners are also beginning to feel the pressure, with nearly a third experiencing poor or very poor financial resilience.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown said: ‘The worst of the tightness may be over, but the pain of rising prices will continue into 2023, and for lower incomes, the young and single people it will be agonizing.
“The past six months have taken a toll on our resilience across the board – from savings to debt, with the overall average Barometer score out of 100 dropping from 63.7 to 60.5.
“This is still higher than before the pandemic (58.8), but we’ve lost three-fifths of the boost we got from things like lockdown savings.”