Lack of rainy day saving ‘a cause of debt’

Failing to save for a rainy day is causing many Britons to fall into debt when they are faced by sudden, unexpected bills, new research has indicated.

A survey by insurer Legal & General found 30 per cent of families are faced with an unexpected need to find attitional cash each month, with the most common reasons being the need to fix a car or a household appliance.

With the average cost of this being £178, the company noted many who have not set money aside can find themselves in difficulty, particularly the 11.5 million who a previous survey it published last month showed to be struggling to make ends meet.

Executive director of savings at Legal & General Mark Gregory remarked: “Our latest research revealed the worst figures for ‘Expense cover’, households with cash left over after paying bills and servicing debt, since we began our survey six years ago (November 2004).

“More than ever unexpected bills are likely to put pressure on household finances or push families into debt.”

He went on to suggest the ideal amount people should look to put away each month is between £50 and £75.

Those who do undertake such actions may help themselves to stay debt free, but for people with no choice but to stump up the cash or have a car off the road or boiler unable to produce hot water, the consequent situation may require a debt management plan.

Housing costs have fallen by 14 per cent in the past two years, according to research by Sainsbury’s published recently, but the head of consulting at property agency Ducalian Timothy Lambert noted this is mainly due to lower mortgage costs.

When rates start going up again this will dramatically change the situation, he warned.

Other research has suggested that people in Britain are draining their savings by £100 per month to cover their household bills.

By Amy White