Most people couldn't pay for a 'rainy day' expense

The Momentum UK Team 30 October 2013

Less than half (40%) of people say that they are definitely saving this year, despite most of us anticipating an unexpected expense.

New research from AA Home Membership has found that, although most of us anticipate some sort of unexpected expense in the next year or two, few are actually doing anything about it, with just 40% of people saying they are definitely saving this year.

The most commonly anticipated “rainy day” expense was the car breaking down, with 30% of people anticipating a serious fault needing repair or replacement. The next common was job loss, with a quarter (24%) anticipating that they may become unemployed. Just under a fifth (19%) worried that they might have to make significant repairs to their home, such as new windows or roofing.

The survey found saving to be the most popular way of paying for sudden expenses - 45% agreed - which could indicate that many of those who aren’t putting money away simply cannot afford to do so. Most of those whose savings fell short said they would rely on credit cards (21%) with 17% saying they would ask a family member to lend them money. 15% would sell something, and 11% said they would be forced to take out a loan.

Helen Brooker, head of AA Home Membership, said:

“We often worry that something expensive will crop up that we’ll need to quickly pay for. When it happens we often wish we’d been better prepared.

“Many people have very good intentions and say they’ll be sensible by putting a bit of money away each month for emergencies. In theory, it makes sense, but in reality few get round to it.”

The research also highlighted a lack of knowledge among consumers when it comes to the best savings accounts, with 70% of people unable to correctly identify the cash ISA limit. Mark Higgins, head of AA Financial Services, said:

“Whether it’s because saving isn’t a priority or people simply don’t have the spare cash to put away, it is lamentable that so few people definitely plan to save, even though the finances of many families are hard pressed.

“The point is that by putting even a little money away as often as you can, you’ll soon build up your savings pot with the added benefit of interest.”