Saving for a rainy day used to be the norm. Things have changed. More Brits are facing more household debt than ever before. Building up savings for a rainy day can be impossible for many. Just paying for essentials is a struggle.
15 million people have no pensions savings.
Experts believe that the degree to which people are now struggling just to get by should be seen as a crisis. And this includes people with no savings to help with unexpected events.
It is estimated that there are more people today with less than a £100 in savings than in recent years. One in every 5 of us have no savings at all to fall back on. 15 million of us have no pension savings.
Household debt reached a new peak last year.
Last year it was reported that household debt in the UK had reached an average of £15,385. Most were indebted to a whole range of lenders. Problem debt was affecting 8 million people. And the lack of emergency funding from councils just makes these people more vulnerable.
For many people without savings and without any access to emergency welfare funding their only option may be to turn to high interest payday lenders.
With nothing to fall back many more people and families are having to turn to food banks. The food bank network handed out a record 1.6m food parcels in a year.
Some councils stopped welfare funding altogether.
Research has shown that A welfare scheme offering emergency financial support to England’s poorest families is no longer available in a host of council areas.
The amount of Local Welfare Assistance cash has slumped from £172m to £46m since 2013.
It has ended completely in more than 20 of 153 areas surveyed. Only two councils – Islington and North Tyneside – have increased funding.
the Children’s Society claims the number of people getting crisis support has fallen 75% since 2013.
It estimates more than a quarter of almost 100,000 applications turned down last year were from families with children.
The no savings problem is even worse in US.
Prosperity Now (PN), an anti-poverty organisation in the US produces an annual scorecard that looks at a variety of measures of economic wellbeing, including savings.
Its 2019 analysis highlights that two-fifths of US households are “liquid asset poor.” In simpler terms “they lack the savings to weather a financial shock”.
Andrea Levere, PN’s president, says that while there are a variety of tools in different states to help lower-to-moderate income households save money, these are fragmented, often ineffective and don’t address the wider issues of low pay and job insecurity.
With the introduction last month of a new bill to Congress however, there are signs that at least some in Washington DC have been paying attention.
The US recognise the need for Action. The UK needs to take action too.
The ‘Saving for the Future Act’ could be a “game changer”, according to Levere.
It would create new options for retirement savings for employees, with tax relief for employers to offset some of their minimum contributions.
But, interestingly, it would also create an emergency savings account that people could access to help respond to unforeseen financial challenges, say if a member of the household became suddenly unemployed.
Also in the US, the bipartisan “rainy day”bill, has been introduced by Democratic presidential hopeful Cory Booker along with a number of Republican co-sponsors.
This would enable taxpayers to defer a portion of their annual tax refund (Americans commonly rely on tax refunds accrued over the course of a year and paid out at the end of the tax year) and opt into a programme where the deferred money would earn some interest. This could, if needed, be accessed before annual tax refund time to deal with emergencies.
Time to look at fresh ways to protect people.
It is a sad truth that more people are finding themselves struggling with poverty and problem debt due to unexpected changes in circumstances.
It is time the UK looked at fresh ways to protect people. Not just because it’s the right thing to do but because it’s imperative.
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