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The price of financial security? £4,000 in the bank

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16/08/2012
As the costs of living keeps on increasing, the average Brit now needs to have an extra £4,000 in the bank to feel financially secure.

But according to uSwitch, the average household falls £1,500 a month short of that mark, with 61% of those polled not feeling financially secure at all.

uSwitch say that for the average Brit to feel secure in the current economic climate, they want to have enough money to cover basic day-to-day living costs without having to rely on credit, yet just 40% are in this position

The second most popular definition is to have at least six months’ salary in the bank just 35% of respondents have this.

Michael Ossei, personal finance expert at uSwitch.com, said: “The dream of financial security seems a long way off becoming a reality for many. Years of pay freezes and the rising cost of living have hit consumers hard and led to a financial nightmare where they are now almost £1,500 a month short of the household income they need to be secure.

“And it’s unlikely that things will get better quickly – with few people expecting pay rises, the majority of homes are unlikely to see any rise in their monthly income, let alone the sort of increase they feel they need.

For just over one-in-ten people (14%), financial security means not having any debt on credit cards or loans or an overdraft to repay.

However, recent figures from the Bank of England show that unsecured consumer credit rocketed to £635 million in June from £408 million in April.

With inflation falling, there is some good news for consumers. But many are still struggling to recover from recent increases in the cost of living, including energy, petrol and food.

Since 2004, energy bills alone have rocketed by 140% – outstripping income which has risen at a rate of just 20%. uSwitch say that these increases were made worse for many as they weren’t offset by pay rises.

Ossei added: “It’s especially worrying for new students, who will face a debt mountain of over £50K when they graduate, but can expect an average starting salary of little over £21,000.”

Ossei also points to cutting back on credit and reducing your debt in the current climate as one of the best things you can do and will put more people back in control of their finances.

“And while many may feel unable to save, putting away as little as £10 or £20 per month can help to build a savings pot. Saving a little and often can make a big difference and cutting back on household bills like energy could free up some cash to help you feel more financially secure.”

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