13th May 2015
Half of households would struggle to make ends meet is if they lost one income, a new study reveals.
The findings from AA Life Insurance show how many families are vulnerable to financial hardship if their main breadwinner’s earnings were lost through unemployment, critical illness or death.
More than two-thirds (69%) say they would have to use their savings to keep themselves afloat, while 17% would be reliant on a credit card, rising to almost half of under 35s
Half of respondents say they would struggle to pay for essentials if they lost their income.
Those that would struggle say car running costs (54%), utility bills (50%) and other household bills (43%) would be trickiest to pay.
Just over a third (36%) say they’d find it difficult to pay their rent or mortgage and a quarter (25%) would not be able to afford groceries.
Two-thirds (61%) say they’d have trouble with other outgoings. Of those, almost seven out of ten (67%) say they’d find it tricky to pay for holidays while half (51%) couldn’t afford to buy a car. Nearly the same amount would have difficulties paying for home improvements (50%) and 37% wouldn’t be able to afford car repairs.
However, to help prepare for unexpected costs 78% of respondents have savings set aside for emergencies; the average amount held is £9,359. Under 35s are most likely to have emergency savings, though they are the age group which typically has the lowest amount of money saved. Those living in the South East and over 65s have the largest amount of savings.
Mark Huggins, director of AA Life Insurance, says: “It’s always wise to have a financial safety net so it’s good to see that so many people are saving.
“But figures suggest that the average weekly spend of a British family is £517, which would mean that a family with savings of around £9,000 could see them disappear in around 18 weeks.
“The thought of relying on a lower or no income at all can be daunting, especially if there are children or other dependents to think about. I think most people recognise that having a financial plan in place in case something happens to the main breadwinner is a wise thing to do, yet many people understandably find it a difficult topic to broach with their family.”
Huggins adds: “Death is one of the hardest topics to talk about, but if the worst happens life insurance can provide a vital lifeline to family left behind. It can be used to provide a lump sum to help families with bills and other costs or to help them pay the mortgage.”