Over half (52%) of adults are struggling to keep up with bills and debt repayments, according to research by the Money Advice Service.
The research is being compared with a similar survey carried out in 2006 by the (then) Financial Services Authority (FSA). This survey found that just 35% of people were struggling, indicating that people’s financial struggles have worsened since 2006.
The research indicates that the financial crisis has meant that fewer people are able to put money away for an emergency and plan ahead; people were worried about making it to the next payday, and a third said they’d had a financial shock in the last three years.
Caroline Rookes, chief executive of the Money Advice Service said:
“In theory, money management is easy - spend less than you earn and consider your future. But the difficulty comes when applying this in the real world.”
The difficulties of the “real world” were evident in some of the responses to the survey. Twenty-one percent said that they had experienced a large drop in income, and 42% said they would have to think about how to cover an unexpected bill of £300, highlighting the difficulty of saving for a rainy day when incomes are squeezed.
However, the report also showed improvements in our financial planning skills as people have had to adapt to tough times. While the 2006 study raised concerns about our understanding of money management, this study shows that 84% of people who set a budget stick to it. There is of course room for improvement; 16% of people said they couldn’t identify the balance on a bank statement.
A spokesman for the Treasury said:
"We recognise that times are still tough for families, but Britain is holding its nerve, we are sticking to our plan and the British economy is on the mend.” He continued:
"This report shows that, despite these tough times, managing your everyday finances effectively can really help to make things a little easier, which is why the government continues to support efforts to boost people's financial skills."
The importance of financial education is further emphasised by the growing popularity of payday lenders, who many believe do not offer the best deals to consumers in financial difficulty. Matthew Chadwick, head of personal insolvency at accountancy firm BDO said:
"Alternative debt providers, such as payday lenders, have surged in popularity but any restriction in that short-term funding or the ability to roll over loans as the economy bounces back may also place people in difficulty."