Only 3 in 10 people could rely on savings if they lost income

Just three in 10 people (30%) could rely on their savings if they lost all sources of their income, according to a new study by Shepherds Friendly.

The mutual insurer found that families are even less likely to have a savings buffer, with just a fifth (19%) of households with children saying they could rely on money they’ve saved.
When looking at how long people could keep their current lifestyle going if they lost their income, the research – based on a YouGov survey carried out in August among 2,212 UK adults – showed that 38% could find enough money to finance their lifestyle for up to three months. Another 12% said they could only last for a month, while a further 9% would have no savings at all to act as a buffer.

For households with children, Shepherds Friendly revealed that more than half (52%) would only be able to finance their current lifestyle for up to three months, and 18% for up to just one month. Furthermore, 47% of those aged between 18 and 24 years cited their parents as a financial safety net if they were to lose their income.
With the UK now in recession and the health threat of COVID-19 still hanging over the nation, the society suggested that more people will be looking at ways they can protect themselves and their family.

However, more than half of the respondents (54%) considered income protection “unimportant”, while a further 12% don’t understand its value, even though it would pay out a regular sum if they were no longer able to work due to illness or injury.

“The consequences of COVID-19 mean it’s never been more essential for people to understand the importance of protecting their income,” said Shepherds Friendly CEO, Ann-Marie O’Dea.

“Our research findings are concerning not only because they reveal that many people are walking a tightrope when it comes to their savings, but also because they show the extent to which people don’t realise how income protection can provide support through the type of challenging situation we’re all finding ourselves in now.
“Advisers, intermediaries and providers need to work together to educate people about the importance of protecting their income and demonstrate the crucial role income protection plays in protecting thousands of families and individuals against financial loss each year.”
Assured Futures commercial director, Ian Sawyer, added: “The events of the past six months have shown how essential it is for people to protect their income. That’s why this new research from Shepherds Friendly is so concerning because it reveals the extent to which people are vulnerable to financial shocks. 
“This should serve as a wake-up call for the industry to ramp up its focus on income protection and raise awareness of how it can provide the financial security people need in the face of future challenges.”

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