How Resilient Are Your Finances?
Posted on 7th March 2023
Have you devoted much thought to how well you and your family could manage if your income changed unexpectedly?
That’s what financial resilience is about. The Vida Insurance team has been looking at the picture across the UK.
How UK adults are managing financially
In the Financial Conduct Authority’s most recent Financial Lives 2022 survey over 19,000 people were asked how they felt about their position. Almost a quarter said their financial resilience was low. They might not have savings and could already be struggling to pay their bills. That’s an estimated 2.2million more than in February 2020. People’s financial situations varied according to their type of work and where they lived.
Many of us have been unprepared for the recent increases in the cost of living. As a result, 24million UK adults (45%) are already finding it difficult to keep up with household bills and credit commitments.
Will your ‘rainy day’ savings be enough?
A survey by LV= highlighted people’s concerns about coping if they couldn’t work for several months. It found that 45% of 25 to 44 year olds without a protection policy weren’t confident they could manage financially. For the self-employed who can’t access occupational sick pay the figure was six out of 10.
Almost half expected to use savings if they couldn’t work for two or more months due to illness or injury.
Many people often don’t realise how quickly savings can run out. Four out of 10 people have savings of less than £5,000. This might only pay their bills for two or three months.
Will sick pay cover your expenses?
Most people are aware of occupational or contractual sick-pay. However, many don’t know how long it will last or how much of their wages or salary it provides.
In the LV= survey those who responded were eligible for an average of 12 weeks’ worth of full pay. However, recovery from many illnesses and injuries could take much longer.
If you qualify for statutory sick pay (SSP) it’s currently just under £100 per week. It’s available for 28 weeks but is unlikely to cover all your bills. If you’re self-employed you can’t claim SSP.
Who relies on your income?
In many families one person’s income covers most of their living costs. It’s also important to think about the longer term impact of spending savings without a way to replace them. This could affect plans to buy a home or start a family, for example.
Three quarters of people said that their income covered at least one other person as well as themselves. On average they support another two people. In blended families many children could rely on one person’s income to some extent. In some cases, people are also supporting their parents or grandparents.
Feeling financially resilient
Around half of adults said they would want savings to cover living expenses for six months to feel financially resilient. On average, this would be around £10,000.
However, nine million people across the UK have no savings and another five million have less than £100.
The LV= survey asked what would make people feel more financially resilient. Three out of five felt protection cover could provide a greater sense of security in the event of illness or injury.
Please get in touch if you would like to know more about income protection insurance.
Vida Insurance Advisors is a trading style of N and J Health & Protection Ltd, an Appointed Representative of The Right Mortgage Ltd, which is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales no. 12657007. Registered Address: 23 Russell Avenue, Bedford, Bedfordshire, United Kingdom, MK40 3TD.
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