As many as 31 per cent of UK households have less than £250 set aside as a financial safety net, according to new research from HSBC, while a fifth have no savings at all.
Meanwhile, the recommended minimum ‘salary cushion’ is three months’ average monthly take-home pay.
The survey of over 1,000 UK households shows that 19 per cent have no savings at all to fall back on and 12 per cent have savings of less than £250.
With average monthly household outgoings currently £1,669, these savings would last just five days3.
The number of households in this situation has risen by three quarters of a million to over eight million since last year, when 28 per cent had maximum savings of £249.4
Those aged 16 to 24 and 35 to 44 are least prepared for a financial emergency – and worse prepared than they were in 2011. Forty-six per cent of the younger group has fewer than £250 in savings (32 per cent in 2011), while 42 per cent of those aged 35 to 44 are in the same position (35 per cent in 2011).
Similar to last year, women are far less prepared than men; 21 per cent admit they have no savings and 13 per cent have less than £250 set aside, compared to 16 per cent and 10 per cent of men respectively.
Twenty-eight per cent of people admit they would be unable to cover their rent or mortgage at all if they were to unexpectedly lose their main source of income.
While 40% say they would use their savings to meet their essential outgoings, they may be underestimating the amount they would need. Worryingly, over one in ten would rely on personal loan, credit card or their overdraft in the event of a redundancy.
Bruno Genovese, head of savings for HSBC comments: “In today’s uncertain economic climate, it is important that families are setting aside a realistic sum of money to be used in emergencies. As a general rule, a financial safety net of at least 3 month’s salary should be set aside in accessible savings for a rainy day.
“By putting away a small amount each month, Britons can help themselves build up an emergency savings pot as provision for any eventuality without having to rely on a solution that could push them into the red.”
