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A huge number of Britons of all ages have no savings at a time when prices are rising by levels not seen in 40 years, new research shows.
Almost half of under 25s have no savings at all, according to research by MoneySupermarket.
Nearly a quarter of over 65s were also found to have zero savings to help them cope with the cost of living crisis, with a further 22 per cent having less than £2,000 in the bank.
Other than age, there was also found to be some stark regional divides. People living in the Midlands were found to be the most likely in the UK to have no savings at all.
While the research did reveal that overall, three quarters of Britons do have an emergency fund saved, more than half are certain they will need to dip into it as inflation spirals.
It perhaps not surprising therefore that the latest figures from the Bank of England show the amount people that are saving has plummeted.
The combined net flow of savings into both deposit and NS&I accounts in June was £1.9billion, down from £5.6billion in May.
The average size of a saving pot across the UK totals £5,677 per household, according to the comparison website, however, this greatly varies between regions.
East Anglia was found to have the highest savings levels with £6,449 saved on average per person, whilst the North East typically only has £2,661 saved per person.
More than half of Britons are certain they will need to dip into their savings this year, with an average of £1,672 per person expected to be used towards unexpected costs is £1,672 equating to nearly 30 per cent of what the average person has in savings.
Personal finance experts all stress the importance of having a rainy day fund – easily accessible money which acts as a financial cushion to deal with unforeseen events.
Some say a rainy day pot should cover between three to six months worth of basic living expenses.
Others suggest you keep the equivalent of at least three months of your take home salary.
Based on this research, even more Britons seem to be coming up short.
The average annual income in the UK is now £31,252, according to ONS figures, equating to £2,604 a month.
Of those who reported having savings, a third have less than £2,000 saved, according to MoneySupermarket.
In the North East the picture is even more dire, with almost two thirds of savers unable to draw on £2,000 in an emergency.
Jo Thornhill, personal finance expert at MoneySuperMarket, said: “As we face the cost of living crisis, any unexpected financial costs or emergencies could have a devastating impact on many households’ finances.
“A car or boiler breaking down could wipe out what savings many Brits have and leave people unsure where to turn for help.”
As the situation worsens, more people are expected to try and either dramatically cut back on
A shopper carries his purchases, including bottles of fizzy drink including Coca Cola, in Walthamstow, east London on February 13, 2022. - UK annual inflation struck 5.4 percent in December, stoking fears of a cost-of-living squeeze as wages fail to keep pace. (Photo by Tolga Akmen / AFP) (Photo by TOLGA AKMEN/AFP via Getty Images)
UK Households in Dire Straits Amid Cost of Living Crisis
spending or borrow their way out of trouble.
Half of Britons have already cut back on spending in order to cope, according to figures revealed in TransUnion’s latest study.
It found that half of Britons have reduced expenditure over the past three months.
Over the next three months, people are planning to reduce their spending on things such as dining out, travel and entertainment, as well as on shopping for clothing and electronics, the survey showed.
For the quarter of Britons with no savings, borrowing is all the more likely. According to MoneySupermarket, two in five will use their credit card, while others will resort to personal loans or loans from family members.
This already appears to be somewhat in motion.
Britons borrowed an additional £1.8billion in credit in June, according to the latest Bank of England figures, doubling the £900million of borrowing in May.
This sits well above the 12-month pre-pandemic average up to February 2020 of £1billion of borrowing a month.
Rosie Hooper, chartered financial planner at Quilter said: “The increase in borrowing is really cause for concern as while it is still warm the worst of the energy crisis is not in full force.
“As the nights draw in and temperatures plunge things could get significantly worse.
“Credit cards have some of the highest interest rates and if the borrowing is to pay for the current higher cost of living or paying for essential bills, then people could very quickly spiral into unmanageable debt.”
The research by the comparison website also found that 12 percent of Britons said they would choose to take out a payday loan to keep them going.
It found that around a quarter of under 35s would turn to a payday loan in an emergency.
A payday loan is a type of short-term borrowing where a lender charges high-interest based on your income. It’s typically a small amount of money lent on the agreement that it will be repaid when the borrower receives their next paycheck.
“There is a concerted effort being made by UK consumers to cut back spending,” said Kelli Fielding, managing director of consumer interactive ay TransUnion.
“With continuing financial pressure amid the rising cost of living, it’s more important than ever that people remain diligent about their credit and put into practice healthy habits such as making payments on time, checking their credit information and keeping an eye on their credit score.
“This will help them stay in control of their financial wellbeing and help to ensure they can access finance if needed.”
While the research reveals that 75 percent of Britons do have savings, more than half are certain they will need to dip into it as inflation spirals and the cost of living rises.
