New research for the Consumer Credit Counselling Service (CCCS) suggests that 5 million UK households are at risk of facing debt problems due to a lack of savings. The research, which was carried out by the Financial Inclusion Centre, found that 4.3 million households have no savings whatsoever, and a further 1.1 million have less than £1k.
As we have been reporting over recent months, the cost of living has been rising sharply, and this has made it increasingly difficult for many people to meet all of their existing financial commitments. In situations where there are no savings to draw on and wages aren’t stretching till the end of the month, people are turning to payday loans and other forms of credit to keep them afloat. Many such cases will result in people being unable to repay the additional debt they have taken on, which can cause major problems.
27% of households without savings routinely depend on credit for essential expenditure, according to the Department for Business, Innovation and Skills. By comparison, only 9% of households with £1k – £10k in savings rely on credit in this way.
The CCCS cited inadequate savings as a major reason for people getting into financial difficulties. They advise people who have no substantial savings to avoid borrowing money, especially if they are already in debt. A spokesman for the charity said: “When you are struggling financially, it can be very tempting to borrow more so that you can simply make your payments to current debts. However this practice of robbing Peter to pay Paul almost always makes a debt situation worse.”
If you are already in debt and struggling to make ends meet, you may be able to benefit from debt consolidation or another form of debt management. Our team of experts can provide confidential advice on the most suitable course of action for you.