A million fewer households are struggling with their finances compared to the same period last year when one in six households were struggling to pay bills.

Almost 1.5 million homes are better off compared to last year, and the number of households that say they have money left over after paying bills and debts has risen year on year. These “stable” households have increased from 40 per cent to 47 per cent, equivalent to 1.47 million households.

The survey also shows that, for households that are financially stable and who can afford to save, the average saved is £120, up 17.5 per cent on figures a year ago (£102 in July 2013).

John Pollock, chief executive officer, Legal & General Assurance Society said; “Our MoneyMood survey suggests we may be seeing signs of recovery in household finances. Two key measures in our latest MoneyMood show finances at home are stronger compared to a year ago.

“Firstly, almost one and a half million more homes say they now have some money left over after paying bills and debts. The second indicator is an increase in the amount saved on average each month, suggesting that more families who have money left over are putting money into savings. The average has grown to £120, up 17.6 per cent from £102 in July year, which could represent a move towards a return of the saving culture. We hope the improved strength of household finances will eventually mean that more people will be able to return to saving for the long term.

“However, it’s not all good news. Although the number of homes who are struggling to make ends meet appears to have fallen year on year, we estimate there are still 2.3 million homes struggling to avoid sinking into debt. Perhaps a reminder that while wage inflation continues to lag behind price inflation; household income growth will remain elusive for some households.”