Brits fall £1500 a month short of being financially secure
Wednesday 15th August 2012
Such is the cost of living today that British households require almost £4,000 a month just to feel financially secure. But, as years of pay freezes and economic gloom take their toll, new research shows that the average household falls £1,500 a month short of achieving this:
• More than six in ten (61%) people don’t feel financially secure at all
• For Brits today, being financially secure means having enough money to cover basic day-to-day living costs without having to rely on credit
• Almost two thirds of people (65%) have suffered a pay freeze in recent years - and only three in ten (30%) workers are expecting to see a pay rise this year
• Future generations: today’s students can expect to leave university £53,400 in debt with an average starting salary of little more than £21,000- making financial security seem even further out of reach.
New research from uSwitch.com, the independent price comparison and switching service, reveals that the average household is a whopping £1,435 a month short of being financially secure. While the average monthly household income stands at £2,504, consumers say they need to bring in £3,939 to feel financially secure. In fact, the gap between the dream income and reality is so great that more than six in ten (61%) don’t feel secure at all.
More than a third of Brits (35%) define financial security as having enough money to cover basic day-to-day living costs without having to rely on credit. But of these, just 40% are in this position. The second most popular definition is to have at least six months’ salary in the bank (16%), but again, of these just 35% have this.
For just over one in ten people (14%), financial security means not having any debt on credit cards or loans or an overdraft to repay. However, recent figures from the Bank of England show that unsecured consumer credit rocketed to £635 million in June from £408 million in April. And with job security uncertain, it’s a sign of the times that having a job with regular income makes less than one in ten (9%) feel financially secure.
With inflation falling, there is some good news for consumers. But many are still struggling to recover from recent increases in the cost of living, including energy, petrol and food. Since 2004, energy bills alone have rocketed by 140%- outstripping income which has risen at a rate of just 20%. And these increases were made worse for many as they weren’t offset by pay rises.
Although recent figures show that wage increases in the private sector rose faster than UK inflation last quarter for the first time in three years, only three in ten workers (30%) said they expect a pay rise this year and almost two thirds (65%) have suffered a pay freeze in recent years - with 15% seeing their pay frozen for at least three years.
This lack of financial security looks set to blight future generations too. With A-level results out this week and tuition fees higher than ever before, today’s students can expect to leave university £53,400 in debt. And with an average starting salary of little more than £21,000, financial security seems even further out of reach.
Michael Ossei, personal finance expert at uSwitch.com says: “The dream of financial security seems a long way off becoming a reality for many. Years of pay freezes and the rising cost of living have hit consumers hard and led to a financial nightmare where they are now almost £1,500 a month short of the household income they need to be secure. And it’s unlikely that things will get better quickly – with few people expecting pay rises, the majority of homes are unlikely to see any rise in their monthly income, let alone the sort of increase they feel they need.
“This problem is not going to go away. It’s especially worrying for new students, who will face a debt mountain of over £50K when they graduate, but can expect an average starting salary of little over £21,000.
“What is encouraging though is that so many people associate financial security with not relying on debt. Cutting back on credit and reducing your debt in the current climate is one of the best things you can do and will put more people back in control of their finances. And while many may feel unable to save, putting away as little as £10 or £20 per month can help to build a savings pot. Saving a little and often can make a big difference and cutting back on household bills like energy could free up some cash to help you feel more financially secure.”
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