Unexpected bills are costing us £17 billion every year - and 3 in 10 don't have savings
Unexpected payments cost Brits £17 billion every year.
One in five UK residents have been left in debt after an unexpected bill during their lives, with a tenth having to move back in with their parents because they couldn’t afford to pay for their home.
John Pears, UK managing director of Lowell, which commissioned the research, said, “Life is full of unexpected events, some have an obvious cost, but with others it’s a secondary consequence - like needing to take time off work and losing pay.
“The danger of not planning for a ‘rainy day’ is that it can lead to extra costs, and potentially get out of control, making the situation worse.
“Based on the research, the average savings needed to cover unexpected bills works out at less than a pound per day across the year. We know that for some people even that can be unaffordable.
“What we also see from our work, and the research of others, is that some people who live payday to payday and don’t track what’s coming in or going out may not even realise they actually have some spare cash they could put aside to cover those nasty surprises.”
45% aren't able to save
The study also revealed the average ‘biggest’ unexpected payment was £924, but three in 10 don’t have savings put aside for such events.
For 45 per cent, this is because they don’t have enough income to save anything, while an eighth admitted they live paycheque to paycheque so saving isn’t possible.
A confident 15 per cent who do not have savings simply said they will pay for an unexpected bill out of their normal bank account.
But those who do put money aside squirrel away an average of £147 each month - a total of £1,746 a year.
How we deal with unexpected bills
Around three in 10 Brits have had to fund an unexpected payment by taking out a credit card, while more than a sixth have taken out a loan or overdraft to see them through.
It also emerged unforeseen bills have left almost a third struggling for necessities such as electricity, gas and food, while 56 per cent have had to forego other luxuries, including holidays and buying things for their children.
Worryingly, those polled predicted that if they had to stop working now for any reason, they would only be able to keep up with current outgoings for nine months.
And if an unanticipated bill came through now, 41 per cent said they would be able to pay it but would worry, while more than an eighth would have to ask a relative or friend for help.
Similarly, one in five of those polled, via OnePoll, said they would turn to their partner or parents first, while 13 per cent would go straight to the bank for assistance.
The study also found that while 45 per cent believe unexpected payments should be expected as part of life, one in five wish there was more help out there to deal with such costs.
And almost two thirds agreed lenders and creditors should offer free budgeting advice to anyone who is dealing with debts in order to manage their money and avoid future issues.