25% of households have saved nothing for Christmas
Over a quarter of Britons have saved nothing for Christmas, according to a survey by free debt management firm PayPlan.
It reveals that the current cost of living crisis means fewer people are saving, with 32% saying they would be relying on credit cards to pay for Christmas, 13% relying on their overdraft and others using payday loans to get by.
Younger people aged between 18 and 24 are fifteen times more likely to use a payday loans company than the over-55s.
The survey also revealed that the cost of living crisis has forced 5% of people to visit a food bank in the last year and 4% said they will be relying on a food bank for their Christmas meal this year.
The survey comes on the same day research from HSBC indicates that over a third of people in the UK – around 8.8 million households - have just £250 or less set aside as a financial safety net.
The research found that a quarter of households (25%) have no savings at all to fall back on (up from 19% in 2012), while one in ten have £250 or less.
HSBC says that, based on average monthly outgoings of £1,500, they would only last five days before running out of funds.
Almost a third (31%) said they would not be able to pay their bills or mortgage/rent if they were to suddenly lose their income, while 36% would be dependent on their savings.
Financial safety net
Oliver Cook, Head of Savings at HSBC, said: "The findings indicate that the proportion of Brits who are financially unprepared should they face any unexpected expenses or loss of income has risen steadily over the past year, with an extra 800,000 households admitting to savings of £250 or less.
"Getting into the habit of saving and making regular savings, no matter how small, can help to build up a financial safety net that avoids having to resort to methods that add to debt. There are many savings accounts in the market that are designed to help people get into this habit, such as regular saver accounts.
"As a target, it's important to keep in mind that, as a general rule, a minimum of three months' salary should be available for a rainy day."
Short-term cash loans designed to be borrowed mid-way through the month to tide the borrower over until they next get paid, whereupon the loan is settled. Generally used by people with bad credit ratings and/or no access to short-term credit such as an overdraft or credit card. Like logbook loans, this type of borrowing is hugely expensive: the average APR on payday loans is well over 1,000% and in some instances can be considerably more.
An overdraft is an agreement with your bank that authorises you to withdraw more funds from your account than you have deposited in it. Many banks charge for this privilege either as a fixed fee or charge interest on the money overdrawn at a special high rate. Some banks charge a fee and interest. And other banks offer a free overdraft but impose very high charges for exceeding the agreed limit of your overdraft.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.