Families cannot afford to save because their finances are crippled by rising debt, according to new research.
Nearly two-thirds of middle-earning families (60%) have little or no savings and risk falling into crisis if the main breadwinner is made redundant or is too ill to work, claims the new study.
While families in the middle-income bracket are normally considered financially secure with an above average income, the truth is they are struggling to save any money due to debts and a rising cost of living.
Financial firm LV= revealed research that shows 75% of ‘Middle Britain’ – married couples or civil partnerships with one or two children and an average gross household income of £35,000 or more – cannot afford to save because of bills. The national average in this plight is 56%.
Millions trapped in money muddle
A third of these families fear that they cannot deal with a financial crisis, while 44% say they cannot afford to save and 36% feel they are financially worse off now than a year ago.
The study disclosed 59% of Middle Britain families do not have enough savings to pay their bills for three months if they are struck by a financial shock.
The Money Advice Service estimates 12 million people are trapped in this squeezed middle-income group and must turn to borrowing because they have no savings if financial disaster strikes.
Justin Harper, head of protection policy at LV=, said: “You’d assume families on average earnings or above would feel relatively financially secure, but our research reveals this is far from the truth.
Call for more government help
“When wage increases are failing to keep up with price increases, household incomes are stretched more than ever before, and families – with responsibilities like mortgage payments and dependants – are struggling to make ends meet.
The company wants the government to help more cash-strapped families.
“It shouldn’t be that way. Income protection products can provide a valuable financial safety net but too few of us have it. We’re calling on the government to help households better cope with financial shocks, such as a loss of income. With a typical 40-year-old couple facing a 60% chance of being unable to work for two months or more this issue could be more real than people think,” said Harper.
