Britain is in the throes of a personal finance crisis. Dramatic figures out recently revealed that personal debt totals £1.43trillion and the average household debt is almost twice as high as a decade ago at £54,000. To some this would come as a surprise, but to many it is confirmation that they are not alone in their struggle.
On the other side of this Himalayan personal debt mountain is the deep savings abyss. Over eight million households have absolutely no savings and, worse, display no sign of starting to save up.
Families have been hit by the double whammy effect. The rising cost-of-living and stubbornly stagnant wages, means that saving any leftover income is no longer possible. Families are being forced to reduce spending still further, and, even so, they are still struggling to not go into debt.
The high street banks do their best to include people on low incomes in our transaction-based society, by providing them with a basic account and debit card. However the service and value banks can afford to provide for these people suggests that banks are not the right answer for their needs. And for those that can afford more than a basic account, the charges and associated costs are often extreme.
With the tightening criteria around bank loans and consequent disappearance of easy credit, inevitably, other less scrupulous providers have greedily filled the gap in the market. Consequently, use of payday loans has increased dramatically. But, with the poorest 10% of households already having average debts of more than four times their annual income, debt will continue to spiral if the problem is not attacked at source.
But, there is more to it than that. Saving isn't just about making ends meet at the end of that month. Saving up can eliminate the repeated crises families face every January and September when they must deal with the Christmas and summer debt hangover. Yet, they still over spend.
There are also the stress related illnesses and relationship breakdowns that are brought about due to financial concerns and a lack of financial management and savings.
Don't get me wrong, families obviously have to spend money. But what is now on offer are new management tools and savings rewards, such as the Ffrees new current account which is specifically tailored to help families out with everyday financial worries. It allows families to save while they spend by rewarding them, which is then redeemed in cash when required.
According to the Money Advice Service, people in control of their finances feel better off and are happier. That is reason enough.
With people's well-being and the future of the nation at stake, action is required:
1. Firstly, this is not only a debt and savings crisis, it is an educational one with many Britons incapable of working out how to save or to manage their money. Providers need to offer free tools and simple budgeting support. Not just to people who can afford to pay for their current accounts, but, more importantly, for those that cannot.
2. The newly established norm of borrowing to pay for borrowed money is a vicious circle that needs to be cut at the roots. Rollover loans must be outlawed, now. New loans can only be allowed for those who have completely paid-off previous loans.
3. Saving money must become a national priority if we are ever to alleviate the debt crisis this country is faced with. Low interest rates and squeezed budgets have reduced the appetite for action in this area. The government must act now to create national awareness of the importance of saving and actively incentivise saving.
This debt issue is not going to disappear overnight but by tackling it decisively now we have a much better chance of solving Britain's savings crisis and, indeed, the country's future.
Alex Letts is CEO of Ffrees Family Finance, the revolutionary new current account provider.