One in three people have no savings to fall back on

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As the economy slowed to 0% GPD growth in the last economic quarter, some might have been concerned about the possibility of recession and its ugly twin, unemployment. Recent research by AA Financial Services highlights the vulnerability of many UK citizens should that occur.

A month away from financial disaster

According to its findings, more than one in three (36%) say that if they lose their job tomorrow, they would be in financial arrears within a month. If the person rents, that number rises to one in two (51%).

This is partially due to Christmas overspending. Three in ten people borrow money to pay for the cost of Christmas. And of those who borrowed, a fifth use their credit cards for more than half of the borrowing. Again, if the person is a renter, that number rises to a third.

As James Fairclough, Director of AA Financial Services, said, ‘It’s concerning that so many in the UK would not be able to maintain their lifestyle and provide for their families beyond a month should their circumstances change suddenly.’

Interest rate rises

Concerning yes, but perhaps not surprising. These numbers reflect the findings of the Office of National Statistics, which show an almost record low in the UK’s savings-to-earnings ratio. Fairclough offers some hope that a change is coming, ‘2020 could be the year, for the first time in over a decade, where national interest rates rise to a significant figure, giving swathes of people good reason to save more of their money’.

The same research shows that 36% of respondents intend to save more this year than in previous years, with one in four (27%) saying that they will reduce luxuries, and one in five get rid of their credit cards. To get on top of their debt, one in twelve (8%) say that they would use a loan to consolidate their debt and then repay with manageable monthly repayments.

Good time to start

Fairclough commented that the start of a new decade is as good a time as any to start the process of cutting back or consolidating debt, while noting that ‘this safety net (of savings) is an essential part of being able to plan and stay on top of finances, and is key to minimising any anxieties that people may have about their future.’  We totally agree.

To find out how to save £5,000 a year without breaking a sweat, click here.  You should always have a safety net equivalent to three months’ pay.


Photo by Raghavendra Saralaya on Unsplash