- Only a third of Brits believe, if made redundant, they would have enough savings to tie them over until they could find a new job
- Of those that do have an emergency fund, a third (33%) have only enough to cover living costs for one month
- In general, there is a low uptake of insurance for major life setbacks among UK adults, with only 6% having income protection insurance, and over a quarter of 18 to 34 year olds having no insurance at all
- One in five (22%) say their 2021 savings goal is to build an emergency fund
Half of UK adults (47%) do not have money set aside in case of serious crises or life events, such as periods of unemployment, legal trouble, bereavements, or serious illness, according to Aldermore’s Annual Savings Tracker research1. Despite this period of economic uncertainty and financial shocks, many UK adults are left vulnerable to sudden life setbacks that can often come at a high cost.
One month away from financial trouble
According to Expatistan2, the monthly living costs of the average person in the UK is £2,012, while the Money Advice Service3 estimates the slightly lower sum of £1,245, but both would suggest the majority of Brits do not have adequate financial funds to assist for more than a month in the event of a major life setback.
Alongside the half of UK adults that have no emergency funds, of those that do, a quarter have less than £1,000 stored away and one third (33%) have less than £2,000 in emergency funds. This means the majority of UK adults have less than a month in financial cover in case they suffer major life setbacks such as redundancy, injury or illness.
Stresses over finance rises in the UK
The Covid-19 pandemic has caused many financial shocks that has created growing stress among the UK population, with one in nine (13%) Brits saying they are currently struggling financially. Nearly a quarter of UK adults (22%) say financial stresses are keeping them up at night, and two in five (41%) say they are worried about their financial future. This uncertainty has meant one in five (22%) say their main money worry of 2021 is not having enough funds for unexpected costs, such as redundancy, loss of income, health costs or repairs to their home.
Lack of safety nets
Despite relatively low emergency funds, Aldermore’s Savings Tracker data shows that those taking out insurance as protection remained very low also. Only a quarter (26%) of UK adults have life insurance, 7% have critical illness insurance, 4% have liability insurance, and 12% have no form of insurance at all. Despite relative fear of redundancy among UK adults, only 6% had income insurance to protect against sickness, unemployment or loss of income.
Generation Z in particular has a general lack of cover with over half (52%) of 18 to 24 year olds having no insurance at all, while one in five (19%) Millennials (25 to 34 year olds) had no insurance cover.
Home and car insurance did however remain popular with 60% of UK adults having them. Retirees remained top of the list in insurance uptake with 94% of over 65s and 97% of over-75s having some form of insurance.
Renewed focus on emergency funds
Only 43% of Brits feel they are currently saving enough towards a stable financial future; however, the Covid-19 pandemic has renewed focus and increased motivation to build an emergency fund among the British public in 2021. One in five people (20%) say their main 2021 savings goals is to build an emergency fund, and a quarter (25%) say Covid-19 has made them realise the importance of having one for the future.
Ewan Edwards, director of savings at Aldermore, said: “No one wants to think about worst case scenarios in life but, as they can often come on suddenly and at high cost, it is important to be financially prepared. Going through an unexpected life setback can be extremely stressful and emotionally bruising, so it is vital that people plan and prepare to avoid financial pressures piling up that can make a bad situation worse.
“Getting into a savings routine can add a strong sense of security for people’s future as it acts as a buffer for the unexpected in life. It may never need to be used for setbacks or major emergencies, and eventually be used on happier things, but having it there is worth the peace of mind.”
Aldermore’s Top Tips for building a fund for emergencies:
- Check where your savings are currently being held – Interest rates may be near all-time lows, but the worst thing you can do is earn nothing at all. Compound interest can definitely add up over time so it’s worth investing some time looking around for the right savings product.
- Don’t just put aside loose change, try and save a set amount each month – Rather than putting aside only the money you have left over at the end of the month, try to save a set amount regularly and consistently.
- Cut down on unnecessary spending – We all deserve a treat now and again, but unnecessary spending habits may be sabotaging your savings. Small changes over time, such as making your own coffee or lunch a few days a week, can add up over time.
- Cancel direct debits which drain your savings potential – Car insurance and gym memberships are two types of payments which are often cheaper if you pay yearly, instead of monthly. While you will need a lump sum to pay in one chunk, you will be able to save money in the long-run.
- Review your savings habits regularly – If you are having difficulty meeting your target amount, reduce your monthly contributions to make it more manageable. If you receive a pay rise, a financial gift or find your monthly outgoings are reduced, consider increasing these contributions.
Notes to editors
1 Research conducted by Opinium in December 2020, with a nationally representative sample size of 4,011 UK adults
2 Monthly cost of living according to Expatistan can be found here: https://www.expatistan.com/cost-of-living/country/united-kingdom
3 Monthly living cost estimate according to Money Advice Service can be found here: https://www.moneyadviceservice.org.uk/en/articles/paying-your-own-way
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