Long ago Britain was a nation of savers, with a Building Society on every High Street, special savings accounts at banks, Post Offices and millions of people used to join Christmas Clubs, so that they had a few hundred pounds to fund gift buying in December. How distant all that now seems, as people simply chin their cash on every gadget, game or gig that catches their eye, and cars, houses, apartments, furniture and even clothes are rented – not owned.
A new report from Zurich shows how many Brits would not be able to manage a financial shock or loss of income. Developed with neuroscientist Dr. Jack Lewis, the Cost of Resilienceexamines the impact that money, including having products designed to protect and insure against loss, have on feelings of resilience.
According to the research, one in three (34%) adults, the equivalent to more than 17.6 million adults across the UK, say they would not be able to recover quickly from an unexpected financial shock, such as an unanticipated period without household income or a sudden need to spend a significant sum. A further one in seven (15%) have no idea whether they would be able to cope or not.
Yet, the report found that almost a quarter (24%) of UK adults have no savings to fall back on and almost the same number (26%) do not feel in control of their life. According to ONS, the average net UK individual income is £1,278pm, meaning that adults could be earning slightly less than the amount needed to feel financially resilient. This combined with people not being in a position to overcome a financial shock or loss of income – should they have to take time off work due to sickness – means many would struggle significantly if disaster was to strike.
While a third said they would struggle to recover from a financial shock or loss of income, only one in ten (11%) have Income Protection, a financial product that shields your pay against illness, injury or being unable to work. Instead, people are more likely to have insurance for their home (71%), holidays (70%) and mobile phone (18%).
The report also found that should an individual experience a financial shock or loss of income, UK adults would struggle to make financial sacrifices, with giving up the family home (51%), car (37%) and holidays (23%) proving the most difficult. More than one in ten (11%) have no idea of the impact a financial shock would have on their household income and they wouldn’t know what sacrifices they’d have to make.
1. Giving up my home – 51%
2. Giving up my car – 37%
3. Not going on a family holiday – 23%
4. Buy less/ no birthday/Christmas presents – 23%
5. Not buying any ‘luxury’ food items – 14%
6. Not buying lunch when out – 13%
7. Giving up weekly nights out (e.g. going out for dinner, drinks etc.) – 12%
8. Giving up my cinema / movie subscription (e.g. Netflix) – 8%
9. Giving up my gym membership – 7%
10. Giving up my magazine subscription – 5%
Rose St Louis of Zurich UK comments, “It is worrying that one in three do not feel they would be able to recover from a financial shock or loss of income, and do not have the savings in place they need to feel financially resilient. The most valuable asset we have is ourselves and our ability to generate an income. Therefore, it’s a concern that nine in ten are likely to prioritise insuring their mobile phone over themselves.
“We need to encourage people to review their circumstances, assess the solutions available and consider what support exists to protect them and reduce feelings of financial vulnerability. Products like an Income Protection Plan, which is designed to provide a regular income if you are unable to work due to illness or disability, could help individuals to feel less vulnerable and more financially resilient.”
IE COMMENT: SAVING IS AN INCOME PROTECTION PLAN
While Zurich make a valid point about Income Protection insurance, it really isn’t rocket science to state some obvious facts here.
If you save a portion of your income each month and place it in a separate account then you’ll have money for those times when the gearbox grinds to a halt in your Vauxhall Astra, or your company suddenly downshifts and you find yourself unemployed and unable to claim benefits due to lacking children or other dependents to unlock the system.
If you’re self employed then the habit of saving is even more important because when you take a holiday you not only have to fund the trip, but lost a couple of weeks work. Same problem with long term sickness. So stash some cash, just as our parents and grandparents did. It may be boring, uncool and there’s no interest from the grasping UK banks, but it’s your freedom, your future, your independence that’s at stake.