Families across the country are failing to prepare for a change in their circumstances.
Aviva last week released a latest Family Finances report, and it makes for grim reading. Based on a survey of over 10,000 people it shows that the current financial situation facing many families in the UK today is rocky, to say the least.
The insurer reports that the typical UK family has seen a 48% increase in their levels of debt in the past year and that the number of families saving nothing each month has reached its highest level for 12 months.
We’ve spoken before about how most people coming to CCCS for advice are doing so after an income shock such as redundancy, a relationship break up or a family bereavement.
Aviva comes to a similar conclusion, stating that 42% of families it surveyed had no money to save each month. It begs the question: what would these families do if they suffered a sudden reduction in income?
Not protecting themselves
CCCS has already identified from its own figures that 6.2 million UK households are struggling with their finances. This is backed up by the Aviva figures which suggest that families are building on their existing debt rather than trying to clear it.
Aviva found that debt repayment takes up 9% of a household’s average monthly expenditure (the cost of housing takes up 20% typically). This tallies with a 2010 Department of Business, Innovation and Skills report that stated nearly 9% of UK households spend more than 25% of their income on unsecured debt repayments.
Aviva’s Louise Colley said: “Although many families are trying to build a savings cushion, this report clearly demonstrates that they also need to consider a protection buffer - protecting themselves against those unexpected financial shocks, such as having a serious illness or worse still, a death”.
This lack of preparation, a reduction in monthly savings and year-on-year increase in indebtedness means that for many UK families it’s only a matter of time before the financial time bomb they’re sitting on goes off.
We’ve recently taken on extra staff to help us cope with the demand and for many debt-ridden families CCCS offers an invaluable service to help them find a solution to the problem they face.
They’re already in trouble
We speak to many clients who in hindsight wish they had taken some sort of income protection policy to protect themselves. In reality by the time most people realise that they’re in trouble it’s already too late to turn to anyone other than CCCS.
Before that we aim to help people avoid falling into debt wherever possible. We talk about dealing with debt here on lovemoney.com, and also about money-saving and debt avoidance on MoneyAware. We would always prefer that people maximise their income or reduce their expenditure to steer clear of problems rather than falling into unmanageable debt.
If the worst does happen and you don’t have any insurance or income protection to fall back on you can always get advice from the UK’s leading debt charity. We can provide free and anonymous debt help via our online counselling service CCCS Debt Remedy. In the end we might be the last bit of insurance you have.