Families are at breaking point with little or no savings to survive on.
If the main breadwinner in a family was to lose their income, it would take an average of just 18 days until their savings disappeared, a report from Legal and General has revealed. This falls to seven days for those aged 25-44.
Most people are unaware of this timeframe and wrongly believe they have a window of around 57 days.
More than a third of people don’t have any savings and the average amount those who do save have is £660, down from £1,094 a year ago.
No savings
In 2012, families saved around 10% less than in 2011 and this is likely to fall by a further 4% in the next 12 months.
On average, 37% of us have no savings and the younger the person, the less they have saved, as you can see from the table below.
|
Age |
Amount of people with no savings |
|
18-24 |
52% |
|
25-34 |
42% |
|
35-44 |
40% |
|
45-54 |
39% |
|
55-64 |
32% |
|
65+ |
24% |
Incomes across the country
People living in the West Midlands have the longest period of 40 days to survive before their savings would run out. This is followed by those in the South East, at 37 days, and those in Greater London, Scotland and Northern Ireland who would all have 34 days.
On the other end of the scale those in the North East, Yorkshire and the Humber would only have only seven days, whereas those in the North West and East of England would have 14 and 15 days respectively.
After this time they would be reliant on benefits and loans from family and friends.
How to protect yourself
So what can you do to protect yourself? First up, you can try to build a substantial savings cushion that you could live on for at least a couple of months if things went wrong in your life. Granted, that's easier said than done, but you might find it a bit easier if you started to budget really carefully. Our MoneyTrack tool could help with that.
It's also frustrating that savings accounts are currenly paying such low rates of interest. You could, however, boost the return on your savings by lending via the peer-to-peer sites such as Zopa and Ratesetter.
You could also consider buying an insurance policy that would pay out if you lost your job or became ill. The two main types of policy are income protection insurance and critical illness cover. You can read more about these types of protection in Five ways to protect your income.
For those people in severe financial trouble, a charity such as Step Change can help. It can speak to lenders and offer interest holidays and provide free debt management plans. It’s also a far better option than resorting to a payday loan company, which will ultimately end up pushing you further into the red.