26 million Britons admit struggle to make ends meet
More than half (52 per cent) of those surveyed are living “on the edge”, equating to 26 million people across the UK, government-backed body the Money Advice Service (Mas) found.
This is a sharp increase from the 35 per cent who were having difficulty keeping up with bills the last time similar research was carried out in 2006.
The service found that many people had poor financial skills and that the squeeze on families following the economic downturn had encouraged a “live for now” culture which was dragging down people’s ability to save enough for their future.
Income per hour has dropped by 6 per cent in real terms since the previous research was carried out, making it harder for people to make ends meet. More than 5,000 people took part in the latest survey and more than 70 families were followed over the course of a year for the Financial Capability of the UK report, which found “a general feeling that people worry about their ability to make it to the next pay day”.
It continued: “And because of this, people are focusing more on the here and now than on planning for the future, including for unforeseen emergencies.”
One in five people surveyed (21 per cent) said they would rather have £200 now than £400 in four months. Two-fifths (42 per cent) also said they would have to think about how they could cover an unexpected £300 bill, and a quarter said they preferred to live for today rather than plan for tomorrow.
The report also uncovered a worrying lack of financial knowledge. Some 12 per cent of people believed the Bank of England’s base rate, which has been at a historic 0.5 per cent low for more than four years, was over 10 per cent.
More than one-third (35 per cent) of people did not understand the impact that inflation has on their savings and 16 per cent could not identify the correct balance on a bank statement.
But the pressure on household finances is encouraging people to be more vigilant. The proportion of people checking their bank statements has increased since 2006, and almost 84 per cent of people said they keep track of their money.
Two-fifths (40 per cent) of people look out for suspicious transactions and 85 per cent say they are putting some money away in savings.
Caroline Rookes, chief executive of the service, said: “In theory, money management is easy – spend less than you earn and consider your future – but the difficulty comes when applying this to the real world.”
The Mas, an independent body set up by government, has a statutory objective of raising public understanding and awareness about financial matters. It is set to publish a strategy on how people can be helped to improve their finances next year.