Almost 6.6 million UK adults have nothing set aside for a rainy day, new research from smart money app Yolt has found. It comes as the financial impact of the coronavirus pandemic continues to widen the UK’s wealth gap.
Worryingly, Yolt’s research found that financial shocks in the last year, such as pay cuts, saw people lose an average of £6,000 off their annual household income.
Others meanwhile have, fortunately for them, found themselves financially better off during the past year’s lockdown restrictions.
On average, the findings suggest UK adults saved an average of £1,250 since March 2020 – although of course, some have been hit with a devastating financial impact.
In contrast to this figure, one in five UK adults (21 percent) have not saved anything since the start of the pandemic.
Those who saw their savings decrease since March 2020 have put away £175 less per month on average.
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“Our research shows that the pandemic has impacted people’s finances very differently,” Pauline van Brakel, Chief Product Officer at Yolt, commented.
“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.”
According to the firm’s research, UK consumers deem £12,500 to be the ideal amount for a “rainy day” fund, however about three fifths (59 percent) of those surveyed don’t have savings that can meet that.
Richard Lane, Director of External Affairs at StepChange, said: “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.”
John, who is in his 50s, and his wife are among those to have been able to have set aside a “rainy day” fund – with an ISA savings pot currently at £20,000.
Months before the pandemic hit the UK, John went self-employed.
The move turned out to be taken “at exactly the wrong time,” he tells Express.co.uk during an exclusive interview.
“I went self-employed, everything looked rosy for a couple of months and then it did not look rosy,” he says, explaining work opportunities “vanished”.
He looked elsewhere, initially working away during the week and then finding a role closer to home.
Unable to go on holidays and weekends away due to the pandemic, the couple have been saving more – and they used part of that towards investments – investing £8,000 plus VAT in the van John uses for work.
On the importance of having emergency savings, he says: “S**t happens and it’s normally quite expensive. A boiler might pack up.
“We have actually bought a new boiler for this house we’re living in now. We’re never worried about bills happening because we’ve always got enough to cover any bill.
“There are no frightening bills around any corner. Even the taxman doesn’t seem that frightening to me because I’ve got the money there, ready.”
The couple bought their current house several years ago, and John explains the property was very dated at the time.
They’ve since spent thousands of pounds on it, fitting it with new windows, door and flooring, as well as new central heating and wiring.
Now, they’re in the process of selling it, and moving somewhere a little quieter.
“I want to go somewhere that isn’t as busy,” John says.
“I want to be a little bit off the beaten track, with a drive for the car.”
Thanks to their renovations, the couple have been able to sell up for substantially more than they bought the property for.
“We’ve invested an awful lot into this property,” he says.
“It cost us probably a quarter of what we actually have sold it for.
“We paid under £50,000 for it, and we’ve got £150,000 for it back.”
While the couple are upsizing with their next move, John explains paying off the mortgage is the aim.
“You either rent or you’re mortgaged – to be mortgage free is if you like the beginning of retirement,” he says.
“The releasing of you from the work trade.”
He adds: “If you’ve got a mortgage, you’ll always have to work. If you haven’t got a mortgage, you don’t necessarily have to work.
“Because then I could semi-retire. So my aim is to always be mortgage free.”