Britons are teetering on the brink of financial disaster with no safety net as savings rates tumble amid higher living costs and stagnant wages.
Some 65 per cent of 9,000 people LV surveyed did not have the recommended 90 days’ worth of outgoings in savings to cover them in case they lost their income.
The LV research showed those aged between 25 and 34 who live in rented accommodation are particularly vulnerable, and among the least financially resilient in the UK.
The problem is not just limited to younger renters though. Some 37 per cent of people nationwide do not have enough saved to cope for one month without an income.
Latest figures from the Office for National Statistics reveal just how much household savings has fallen. The current UK household savings ratio – the percentage of disposable income which is saved – is just 1.7 per cent.
The average savings ratio over the past 54 years is 9.2 per cent – more than five times higher than the proportion which households are currently putting aside.
Many so-called late-Millennials are unable to save as they struggle with debt.
Some 43 per cent said the reason they aren’t saving is because of student debt, while 32 per cent are battling credit card bills.
One in five of those aged 25 to 34 have more than £5,000 in unsecured debt while 12 per cent have taken a loan from friends or family.
The slump in the value of sterling is thought to have contributed to the dip in the amount people are saving.
A weaker pound has meant inflation has soared, pushing up the cost of living and effectively reducing the real value of wages. It means squeezed households have less to put aside at the end of the month and many are dipping into savings rather than adding to them.
As well as that, record low interest rates over a number of years have reduced the attraction of saving, because of the meagre amounts of interest which can be earned. Instead, borrowing has increased as mortgage rates have stayed low and credit card debt has been easier to acquire.
But the Money Advice Service recommends having a minimum of 90 days worth of outgoings in savings.
Rob Morgan, pensions and investment analyst at Charles Stanley, said: “Now more than ever people need to make sure they have a safety net, as household budgets are stretched and job security is shaky.”
Mr Morgan said savers put off by low interest rates of savings accounts should think about the long-term benefits of putting money aside.
He said: “There has been a huge increase in the number of people taking out short-term loans, which have cripplingly high rates of interest, and that is a result of not having a cash buffer.
“Having savings in the bank might not earn you any money but it will help you avoid being forced to take out products with sky-high interest rates if you ever do need emergency funds.”
LV suggested households consider having income protection insurance to fall back on and provide cover their outgoings – currently just 7 per cent of renters aged 25 to 34 have the insurance.
Justin Harper, head of policy for protection at LV, said: “It’s clear that people are at risk of finding themselves struggling to make ends meet if they lost their income.
“It’s vital this generation is not overlooked and the industry and government should work together to ensure more people are able to increase their resilience to financial shocks.”
