More than four in ten (43 per cent) of Brits have no emergency savings set aside for unexpected financial events such as unemployment, illness or home repairs, new research has found.
Furthermore, almost one third (29 per cent) are concerned about their ability to meet basic financial commitments such as rent or mortgage payments over the next six months, while 37 per cent are worried about being able to pay the bills over the next two years. Among 35-44 year olds, this figure rises to 48 per cent.
The research, which was carried out by consumer credit agency Equifax, comes after ten years of historically low interest rates, which have eroded the value of cash savings. Furthermore, rising inflation has put pressure on many household budgets. This has led to an increase in household debt, sparking speculation of a consumer credit crisis less than a decade after the global financial crisis.
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“The extent to which people live pay cheque to pay cheque with no financial cushion is a particular concern in the current uncertain economic environment,” said Jake Ranson, banking and financial institution expert at Equifax.
“Debt levels are on the rise and wherever possible consumers should budget for unexpected expenses. The recent interest rate hike highlights the importance of setting aside some cash to counter any financial shocks.
“To help consumers better manage their finances, companies must ensure they offer products that match an individual’s financial capacity in the long term, taking into account economic jolts that could impact their ability to meet repayments.”
The Equifax research also found that renters were a lot less likely to have sufficient savings than homeowners.
While 67 per cent of homeowners said that they had set aside enough money to see them through financial hardship, only 33 per cent of renters had done the same. This is despite the fact that 43 per cent expect their rent payments to increase over the next year, an increase that 42 per cent said they would be unable to afford.Last updated: November 27th, 2017