Four million Britons will be unable to maintain their current lifestyle beyond February 2011 if they had to live off their current emergency financial provisions, according to Scottish Provident's Financial Safety Net report.
17% would rely on their savings to maintain their current standard of living should an emergency happen. Those who would rely solely on their credit cards only expect to be able to fund their current standard of living for just five months - in addition to finding themselves in a state of rising personal debt.
31% do not have any form of emergency financial provisions - or financial safety net - in place at all and should they or the main breadwinner be diagnosed with a serious illness, disability or die they would have to drastically cut back their living costs. 10% could even be forced to sell their house. 23% say they do not know what they would do if they suddenly had to maintain their current standard of living without the main source of income.
Scottish Provident is campaigning for all to ensure they have a reliable financial safety net in place - this being the means to sustain your quality of living should you or the main breadwinner of the family get diagnosed with a serious illness, suffer a disability or die - and not have to rely on cutting living costs, relying on your everyday savings or having to sell your house. With 58% without any form of insurance at all there is a long way to go before the nation has a robust financial safety net in place they can fully fall back on.
Top tips to create your own financial safety net:
Assess your situation - as you experience different life events, such as buying a house, having children, changing your job, your emergency plan needs to adapt too. Make a critical assessment of your current lifestyle and how you see this in the near future to ensure you protect everything that is important to you at that time
Pay off large credit card debts - although credit cards can appear as an instant safety net, they are a false economy, as debts will simply escalate should you be unable to pay them off. These will only add to your worries should you have an emergency situation
Build up your emergency savings - put in as much as you can afford to save (over and above your standard savings) into a separate account, which you can fall back on immediately. Ensure you use an easy access account, which you can access at the drop of a hat, as you never know when you will need it
Tell your next of kin your emergency plan of action so that someone else is aware of your emergency savings and how to access them, or which insurance products you have and where the details are. This will allow them to put your emergency plan in place should you be unable to
Susan Barclay of Scottish Provident says, "As there are millions with less than six months worth of emergency financial provisions in place, it is clear that urgent action is needed, as well as a more realistic understanding about how you will survive should the main breadwinner become unable to work. It can be confusing to know even where to start when you take-stock about what you and your family will need should an unplanned emergency happen - especially as these are events which the majority of us hope we will never have to experience. We are urging everyone to start taking action now to build your own personal financial safety net. Having this in place will give you peace of mind that you and your family will be properly cared for and your standard of living will be maintained should you or a loved one become seriously ill, disabled or even die."
Life insurance: News update: 6 October 2010