approximately 1.3 million families across Britain had no savings before the biggest cost of living crisis in a generation hit, according to a think tank.
With no savings buffer to rely on, some will pin their hopes on friends or family to bail them out if they have an unexpected bill, while others think they just can’t handle it, according to research from the resolution. Foundationwhich will be published in full later this week.
The Foundation’s third annual wealth audit in the UK, in partnership with the abrdn Financial Fairness Trust, examined how a lack of wealth and high debt could have a major impact on how families cope with the current crisis in the cost of living.
In the period leading up to the coronavirus pandemic (2018 to 2020), nearly half of families across the UK had savings worth less than a month’s income, while about 4% – a total of 1.3 million families – had savings at all. had no savings, according to the Foundation. .
While low savings are fairly common in society, the report found that the poorest tenth of households were four times more likely to report having no savings than the richest tenth of households, at 8% versus 2%.
This savings gap will only have been exacerbated during the pandemic, according to the Foundation, as the richest fifth of families were about four times as likely to say they could increase their savings during lockdowns as the poorest fifth (47% compared to 12%) .
This lack of savings is key to how families can cope with increasing cost pressures or unexpected expenses, such as the current rise in energy bills, the Foundation argued.
More than a quarter (28%) of families with no savings said they simply wouldn’t be able to handle an unexpected expense, while nearly a third (32%) said they should turn to friends and family when faced with an unexpected expense, compared to just 3% of those with sufficient savings.
The Foundation pointed out that as the impact of rising living costs is widespread and many households will face higher bills this winter, the ability to turn to others to help financially is a coping mechanism less likely to be available than in more “normal” times.
Those in arrears or arrears are also more than twice as likely to report high levels of anxiety than those without late payments, at 15% versus 8%, the think tank said.
Problematic debt is particularly challenging for low-income families, with payment arrears accounting for about 12% of their total monthly income, it added.
The Foundation focuses on improving the living standards of people with a low to middle income.
The Government has previously unveiled a package of support for the cost of living, including a one-off payment of £650 to more than eight million low-income households on Universal Credit, tax credits, pension credit and legacy benefits, with separate one-off payments of £300 for retiree households and £150 for people receiving disability benefits.
Households will receive a € 400 discount on their energy bill from October.
The Foundation used the Bureau of National Statistics (U.S) Wealth and Assets Survey for his research.
With many of those families unable to save during lockdowns, they are now approaching the biggest cost of living crisis in a generation with no financial buffer
Molly Broome, an economist at the Resolution Foundation, said: “The huge wealth disparities in Britain have left about 1.3 million families – mainly those on low incomes – entering the pandemic with no savings.
“With many of those families unable to save during lockdowns, they are now approaching the biggest cost of living crisis in a generation with no financial buffer.
“Families with no savings rely heavily on friends and family to meet unexpected expenses. However, there is no guarantee that they will be able to provide support, as rising energy bills during the difficult winter ahead will affect nearly all households.
“As a result, anxiety levels in families without a savings net are much higher than in families with savings to fall back on.
“We need to break this cycle of low growth and weak savings that brutally exposes so many families to economic shocks.”
A government spokesperson said: “We understand that people are struggling with rising prices and so this year we have taken action to protect the eight million most vulnerable British families through at least £1,200 in direct payments with additional support for retirees and pensioners. people applying for disability benefits.
“Thanks to our £37bn support package, we’re also saving the typical worker more than £330 a year through this month’s National Insurance Rebate, allowing people with universal credit to keep £1,000 more of what they earn and cut fuel tax by 5p – the largest ever cut to cut fuel taxes, saving an average family £100.”
– The Resolution Foundation’s Wealth Audit 2022 – in partnership with the abrdn Financial Fairness Trust – will be published on Wednesday, July 20.