It seems that the old adage of saving for a rainy day isn’t being followed by almost a third of people in the UK, with 29 per cent saying they were unable to save in 2016.
According to research by the debt charity StepChange people in the low-income bracket are most affected by being able to save, leaving them vulnerable to changes in their financial circumstances.
An estimated 14.5 million were unable to save at all, plus a further 9.5 million (19 per cent) reported that they were only able to put aside less than ?50 per month.
Not surprisingly 45 per cent of those on a lower income of less than ?20,000 per year said that they were unable to save at all over the last year.
A third of those people on low incomes could not survive for more than a month if their income dropped by a quarter, whilst even including those on higher salaries only improves that figure to 20 per cent, highlighting the financial plight of many.
StepChange have called on the government to improve the already existing Help to Save scheme set up to assist those on tax credits or universal credit in making regular saving.
Currently only around one in seven (500,000) of the 3.5 million people who qualify for the scheme are expected to have taken advantage of the opportunity by 2020/21.
The charity would also like to see the pensions’ auto-enrolment system adapted to include a precautionary savings element.
Chief Executive of StepChange, Mike O?Connor, said: ‘We are seeing household borrowing increasing, reduced social safety nets and rising inflation. Not having a precautionary savings pot means that people are extremely vulnerable to falling into severe problem debt. For too many people stretched budgets leave no room to put even a little aside as they struggle to get by, just about managing month after month. A drop in income or an unexpected expense pushes people over a cliff from managing to crisis.
‘Help to Save is a scheme we both campaigned for and welcomed, but a better plan is required to ensure that it meets the needs of those it is designed to support. The pensions? auto-enrolment system has proved successful at overcoming barriers to pension saving, and building a rainy day savings element into the scheme could help overcome the same barriers to shorter term rainy day savings, helping insulate families from financial shocks and preventing the slide into problem debt.’