August 30, 2022
The latest Deadline to Breadline report from Legal & General claims that the financial resilience of working families in the UK has shrunk by a fifth since 2020, down from from 24 days to 19 days. According to the report, people overestimate by nearly six weeks how long they could fund basic living costs such as housing costs, loans/ credit card repayments, utility bills and food if they lost their income. Households have average savings of £2,431 and debts of £610. Accounting for average daily expenses of £93, this would see the average household run out of money in less than three weeks if they were to lose their income.
The poll of 5,000 households suggests that most people underestimate how long their money would last, assuming they would have 60 days of breathing room were they to lose their job. With household costs increasing significantly, and more businesses under pressure, this has raised concerns that many people across the country could be especially vulnerable to financial shocks should the worst happen. Household energy bills, for instance increased by 54 percent in April 2022, a record increase, and are likely to rise substantially again in October and the New Year.
While a quarter of working families are yet to notice an impact from the increased cost of living, cutting back, even the majority of those with no debt and a higher income (over £50k annually) are being more cautious. 61% of those with a household income of over £50k are cutting back on essentials.
Nearly 2 million adults have no money left each month, a rise of 330,000 in the last 2 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 also claims 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.
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 they lose their income. However, these households are also the most likely to overestimate their safety net, assuming they can manage for at least 180 days. This raises concerns as older households have less time to build their savings back up before retirement and typically find it harder to find new roles following redundancy.