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Half of UK households are “financially fragile”

Half of UK households are “financially fragile”

Category: Money

Updated: 24/02/2016
First Published: 24/02/2016

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Being financially secure is as much about being prepared for the unexpected as it is being able to cover daily expenses. Unfortunately, research from Scottish Friendly has found that a worrying number of people wouldn't be able to cope with an unexpected bill, with almost half being "financially fragile" as a result.

Financial concerns

The latest Disposable Income Index shows that half of UK households (50.3%) are worried about coping with large unexpected bills, and the concern doesn't stop there: a further 30.5% don't consider themselves financially comfortable and 24% think their finances will be worse in 12 months' time, while 47.5% admit that they're worried about money in general. As a result, just 45.2% said they're in a position to save or invest on a regular basis.

Even more worrying is the finding that many of these concerns could be justified, with many people spending beyond their means each month, and not on luxuries, either. This is particularly the case for the younger age group: 20.3% of those aged 18-24 are spending more than their income each month just on housing and associated costs, while 28.5% are going into the red after paying for the other day-to-day essentials.

This isn't confined to younger consumers, however, with many finding it difficult to make ends meet. Overall, respondents have an average of £905 left over after housing costs and other essentials have been paid for (including groceries, transport, childcare and utilities), but 8.3% said they spend more than their income on housing costs, while 15% spend more on other essential costs, which paints a worrying picture of the state of the nation's finances.

The figures go against what the wider health of the UK economy would lead us to believe, says Calum Bennie, savings expert at Scottish Friendly, as "headline economic data suggests that the financial situation of UK households should be improving. Subdued inflation, high employment and gradual increases in wages theoretically help consumers feel better off, but any of these benefits seem to be offset by the rising cost of living, and housing costs in particular.

"These day-to-day financial pressures are leaving people worried about their disposable income, and a sizeable minority actually find themselves spending beyond their means every month. Consequently less than half the population are saving regularly. This kind of financial fragility should be a concern for UK policy-makers and businesses."

Could you cope with an unexpected bill?

If you're one of the many households who feel a bit financially fragile, it's time to take action. Start the process by cutting costs wherever you can: use vouchers or discount codes to cut your grocery bills down to size, for example, and make sure to compare energy tariffs and broadband packages to make sure you're getting the best deal. Likewise, comparing quotes when it's time to renew your insurance policies could help you save a small fortune, and if you're forced to revert to credit to make ends meet, make sure to do it wisely.

Opting for a credit card that charges 0% on purchases could be ideal, and try to only use it for emergencies. Alternatively, you may want to opt for a card that offers cashback or rewards, but this should only be considered if you can pay the balance back in full each month.

Then it's time to start building up your financial reserves, and if you've managed to cut your monthly outgoings, consider putting the extra funds straight into a savings account – if you never had the money before, you won't miss it now, and it could be a lifesaver should an unexpected bill crop up.

What next?

Find the right savings account to build your emergency fund

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