Nearly two million self-employed people are unable to save any money each month, leaving them vulnerable to financial shocks, according to new research by LV=.
The second instalment of the insurer’s Income Roulette report – a study of debt and savings among 9,000 people – has found that four in 10 (41%) self-employed people can’t save any money each month, while a further one in 10 (11%) saves less than £50 a month.
In addition, a third (33%) say they couldn’t survive for more than three months – the Money Advice Service’s (MAS) recommended amount you should have in your ‘rainy day fund’ – if they lost their income.
The findings echo the first instalment of LV=’s report, which found that more than half (55%) of older millennials – those aged between 25 and 34 years old – fall short of the MAS’ recommended savings amount of 90 days’ worth of income.
Bills hit the self-employed hard
When looking at barriers to saving, LV= found that monthly bills eat up the wages of nearly two thirds (62%) of self-employed people, compared to a national average of 56%, with this group also more likely to be hampered by debt (38% vs 28% national average). In addition, sole traders are more likely to be hit by unexpected costs such as home maintenance or car repairs (33% vs 28%).
As self-employed people don’t have the safety net of employers’ benefits, such as sick pay, they are often recommended to consider taking out some form of income protection to avoid having to rely on state support if they couldn’t work because of accident, sickness or disability. However, only 4% of self-employed people in LV=’s research had income protection, compared to a national average of 11%.
Justin Harper, head of protection policy at LV=, comments: “The labour market has changed markedly in recent years, with self-employment continuing to rise. The government’s Taylor Review sought to address the challenges of the modern workplace and ensure all workers are aware of their rights, but it’s often the case that self-employed people and small business owners lack the safety net of an employer’s benefits, such as sick pay.
“This means they risk having to rely instead on state benefits which can involve a lengthy application and wait, with no guarantee of any support.”