Bills 'breaking the budget'

Three in ten households have to find extra funds to cover unexpected bills each month, according to new research suggesting millions of families are struggling to avoid sinking into arrears.

Households facing unexpected bills had to find an extra 178 last month on average, according to the latest Money Mood survey by insurer Legal & General. It said the figures showing how much cash households have left over after paying bills and servicing debt were the worst since the research began six years ago.

The biggest single cause of unexpected costs was car repairs, accounting for 30 per cent of unexpected bills, while the repair or replacement of household appliances was responsible for almost a fifth. High phone bills were also common expenses that hadn't been budgeted for.

Mark Gregory, executive director of savings at Legal & General, said the survey showed it was imperative for households to look again at their monthly budgets.

"What we used to call 'saving for a rainy day' has perhaps never been more appropriate," he said. "Our figures suggest that saving a modest amount, say 50 to 75 per month, would help most households."