" class="no-js "lang="en-US"> THE ‘RAINY DAY’ DEFICIT: 6.6 million UK consumers reveal they have nothing set aside - Fintech Finance
Wednesday, April 17, 2024

THE ‘RAINY DAY’ DEFICIT: 6.6 million UK consumers reveal they have nothing set aside

New research from Yolt, the award-winning smart money app, reveals today that almost 6.6 million UK adults have nothing set aside for a rainy day, as the financial impact of the pandemic continues to widen the UK’s wealth gap.

UK consumers deem £12,500 to be the ideal amount for a “rainy day” fund, however about three-fifths (59%) of those surveyed do not have savings that can meet that. On average people have £8,000 less than they anticipate they would need in the event of a financial shock. Yolt’s research found that financial shocks in the last year, such as pay decreases, saw people lose an average of £6,000 off their annual household income. On top of this, covering any unexpected costs can add up, for example installing a new boiler can cost anything between £1,500 and £4,764, according to Which?.

As highlighted by the Office for National Statistics (ONS) recent findings the impact of the pandemic on consumers’ finances has been felt more by some groups than others, such as the youngest and lowest paid. Yolt’s research found that on the other end of the spectrum, a lucky group has been able to save more due to a lack of opportunities to spend while in lockdown, with UK adults saving an average of £1,250 since March 2020. The divide is highlighted further by the recent findings from the Bank of England demonstrating that in 2020, some UK consumers were able to tackle their debt, with £16.6bn repaid on credit cards and loans.

In contrast, one in five UK adults (21%) have not saved anything since the start of the pandemic, and those who saw their savings decrease since March 2020 have put away £175 less per month on average.

One factor in this savings divide could be people’s work circumstances, as those who have been working from home full time because of the pandemic have managed to save on average £1,750 since March 2020, almost £500 more than those who are still going into work (£1,250). This could be for a number of reasons, such as a lack of commuting expenses, with those working from home spending less on travel (82% vs 66%).

Pauline van Brakel, Chief Product Officer at Yolt, comments: “Our research shows that the pandemic has impacted people’s finances very differently. It is fantastic to see that many people already have some form of savings set aside to weather any future financial shocks, especially in the face of adversity and uncertain economic conditions. However, it is important to note that not everyone is in this position, some are facing real economic hardship, and saving anything at the moment may feel like a tall order for those who have been harder hit.

Although understandably the current climate is challenging, people should look at ways they can protect themselves and the steps they can take, including knowing what they have coming in each month, and reviewing their spending and regular outgoings, so they can budget for the weeks or months ahead.

“At Yolt, we recently launched an evolution of our app designed to help you manage your finances and take the hassle out of saving –with tools such as savings goals for rainy days and round-ups, we can help you save while you spend and make long-term savings habits easier to keep.”

Richard Lane, Director of External Affairs at StepChange, added: “We know that when people don’t have any savings to meet unexpected costs like a car repair or replacing an essential broken household appliance, this can create a need to borrow that can then lead to further debt problems. If people lose their income, the absence of savings can hasten debt problems. Some 4.9 million people negatively impacted by coronavirus have had to borrow to make ends meet – and although savings aren’t a full protection against debt, they do provide a cushion that can help to tide people over periods of unforeseen difficulty. Building up savings is hard for people with limited income, but smart ways of helping to build up even a modest rainy day fund are really helpful.”

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