UK

Paying Bills A Struggle For More Than Half Of All British Adults, Report Finds

02/08/2013 09:58 BST
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More than half of British adults are 'living on the edge' with their finances, a major government-backed report has found.

According to the Money Advice Service, there are nearly nine million more adults struggling with their finances than seven years ago, equating to 26 million people across the country. This marked a 35% increase since the last time research was conducted in 2006.

Hourly income has dropped by 6% in real terms over the last seven years. One quarter of adults said they felt forced to "live for today" rather than save money and plan for the future.

One in five adults (21%) said they would rather have £200 now than £400 four months later. Many adults also have a striking lack of financial knowledge, according to the report.

More than one in 10 (12%) of people believed the Bank of England's base interest rate, which has remained at a 0.5% historic low for over four years, is higher than 10%. More than a third (35%) of adults did not understand how inflation impacted on their savings.

However, adults are being more vigilant with their financial outgoings, with 84% saying they keep track of their finances. Two fifths (40%) said they watch out for suspicious transactions.

Over 5,000 people were surveyed and over 70 families followed over a year for the Financial Capability Of The UK report, which uncovered "a general feeling that people worry about their ability to make it to the next pay day".

"And because of this, people are focusing more on the here and now than on planning for the future, including for unforeseen emergencies," it read.

Caroline Rookes, MAS chief executive, said: "In theory, money management is easy - spend less than you earn and consider your future - but the difficulty comes when applying this to the real world."

The MAS was set up by the government in 2011 with an objective to raise public understanding about finances.

The previous research in 2006 was carried out by the Financial Services Authority (FSA) regulator, which has now been taken over by the Financial Conduct Authority (FCA).

A Treasury spokesman 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.

"The Government has taken continued action to help households with the cost of living, including cutting tax for 25 million people by raising the personal allowance and freezing fuel duty.

"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."