Are you prepared for the financial needs and challenges that may lie ahead in the future?
Almost 15 million people across the UK (31 per cent of the adult population) are not currently making any efforts to save for the future, while eight million people (17 per cent) have no savings to their name at all, according to Scottish Widows’ seventh annual Savings and Investment Report.
Managing to put something away
Although 63 per cent of Britons are managing to put something away, nearly a third (32 per cent) have a total pot of less than £1000, which is less than the UK average combined monthly mortgage and council tax costs (£1009). In addition, almost one in five of those who expect their financial priorities to change are seriously concerned about job security
for the coming year.
These statistics paint a bleak picture of people’s ability to cope with financial shocks that could hit now or in the future.
Families shoulder the burden
A 25 per cent of respondents with families have loaned ‘a substantial amount’ to their children, often to simply help them meet daily living expenses. Support is also provided for higher education and property purchases, with an average loan of almost £15,000 – an 11 per cent increase from the amount reported last year.
Interestingly, when asked what they’d rather give their children money for, parents opted for helping them get on to the housing ladder (63 per cent) over university fees (21 per cent).
A stark impact on parents’ finances
This level of support is having a stark impact on parents’ finances with a quarter (24 per cent) cutting back on their savings and almost one in ten (8 per cent) stopping saving altogether.
However, it isn’t just parents funding their children; whole families are pulling together to support each other. The report shows that grandparents are helping their grandchildren; children are lending money to their parents, and siblings are also supporting each other. Specifically, on average grandparents have lent £3,665 to their grandchildren, 6 per cent have lent to their parents with an average amount of £4,371 exchanging hands and 9 per cent of people have lent an average £3,485 to their sibling.
The savings shortfall spiral
The wider economic climate is also increasing the pressure on those struggling to save. 30 per cent of people report that they have been forced to cut back on their savings by rising costs, whilst a further 27 per cent are saving less than two years ago, principally due to a lower level of disposable income. Across the board, the majority (64 per cent) of people report that having no money available is a major barrier to saving.
Importance of building a safety NET
People clearly recognise the importance of saving something towards their future financial wellbeing, which is encouraging. The importance of building a safety net for themselves and their families is a priority, with 63 per cent of people reporting that they managed to save some money in the last 12 months. However, just a quarter of those people believed they were saving enough to meet their long-term needs, with a further 37 per cent saying they would definitely not be achieving this goal.
When we are faced with immediate financial commitments, such as mortgage payments and day to day living expenses, then it is absolutely necessary to give these pressing needs priority. However, taking a wholly short-term view of our finances will mean we are unprepared for the financial needs and challenges that lie ahead in the future.