"It may feel overwhelming but we encourage people to do what they can now so they are best prepared for a further squeeze on finances coming this autumn."
- Bernie Hickman, Legal & General Retail chief executive
On average, households have £2,431 in savings and £610 in debt. Accounting for average daily expenses (£93), these households could run out of money in less than three weeks if they were to lose their income, reports Legal & General.
Legal & General also found that most households underestimate how long their money would last after losing their income. With household costs increasing significantly, and more businesses under pressure, these underestimates have raised concerns for thousands across the country who could become especially vulnerable to financial shocks should the worst happen. Household energy bills, for instance, increased by 54% in April 2022, and are likely to rise substantially again in October and the New Year.
According to Legal & General, ¼ of UK households are still yet to notice an impact from the cost of living crisis with cutting back - on both essentials (69%) and luxuries (81%) – becoming the norm. Higher income households (over £50k annually) are also being cautious with 61% of these households also cutting back on essentials.
According to the report, nearly 2 million adults in the UK have no money left each month, a rise of 330,000 in the last two years. Concerns are particularly high for the UK’s poorest workers. Those earning under £20,000 a year – 5 million people in the UK – are living pay-packet to pay-packet and the average household in this group has no safety net should the worst happen.
Legal & General’s recent Rebuilding Britain Index report also found that the cost of living crisis is increasing inequalities between different parts of the country, disproportionately affecting households in areas where there is a greater need for levelling-up initiatives.
Furthermore, the report revealed that older workers in the UK (55 to 65 years old) tend to have higher levels of financial reserves they can draw on, meeting their expenses for an average of 99 days in the event of lost income.
However, these households are also the most likely to overestimate their safety net, predicting at least 180 days after losing their income. This raises concerns over time restraints to build their savings back up before retirement with older adults typically finding it harder to secure new roles following redundancy, reports Legal & General.
Commenting on the report, Bernie Hickman, Legal & General Retail chief executive has said:
“Our latest research presents a challenging picture for working households across the UK. We often talk about managing money month-to-month but, as our findings indicate, for some, it’s a case of day-by-day.
“The cost-of-living crisis is squeezing the purses of people all over the country, leaving households of every shape and size with money worries. There is only so much people can do to manage their budgets in these difficult times but there are resources available that can help.
Half of all people in the UK (52%) haven’t taken advantage of financial guidance available, including free services like MoneyHelper, to help make the most of what they have.”
Legal & General’s Deadline to Breadline report, published later this year, will explore the financial resilience, security, and engagement of working households across the UK.