Business

Why we could be just 19 days from the breadline . . .

Every penny counts - a new report shows people in Northern Ireland could be just 19 days from the breadline
Every penny counts - a new report shows people in Northern Ireland could be just 19 days from the breadline Every penny counts - a new report shows people in Northern Ireland could be just 19 days from the breadline

HOW long could your family household survive if you were suddenly to be deprived of your income?

Latest statistics from Legal & General give the answer, for in Northern Ireland, the typical family’s cash reserves would be exhausted in just 19 days.

L&G’s 'Deadline to the Breadline' analysis crunches the numbers for Northern Ireland, to show how long it would take before we land on the breadline, after a sudden shock to our finances.

But the real shock is how deluded we are about this: the average family believe their cash reserves would last 72 days – almost four times the actual figure.

Just £706 is the average savings a family could draw on, if a sole breadwinner were to lose their job, be struck down by accident or serious illness, or, tragically, to die.

But those with savings are the lucky ones; 42 per cent of families say they have nothing at all saved for a financial emergency, leaving them totally exposed. This implies that they would be on the breadline tomorrow, if hit by a financial earth tremor.

The situation’s not much better concerning insurances to protect our income. Over a third of us – 39 per cent - have neither critical illness insurance nor income protection insurance to replace our income, if fate were to deal us a blow.

How likely is it to happen to you?

The insurer Royal London tells us that during our working life, one in seven of us will suffer a serious health setback that takes us off work for at least three months.

However, only one in nine of us are insured for critical illness, a policy which pays out a tax-free lump sum, and only one in 25 has payment protection insurance, which provides a monthly ‘replacement salary’ for an agreed term.

On that front, L&G say that most Northern Irish people (57 per cent) would prefer to simply save up for an unexpected event, rather than take out insurance.

The industry’s view of this is that people shy away from insurance, because they don’t understand how critical illness and income protection policies work.

As a result, 39 per cent of households would expect to draw on savings.

However, those really in danger are the 14 per cent - the ‘Jams’, those “just about managing”, who could not see where they could cut back on spending, to reduce their outgoings.

For those who could identify some cuts, over half (53 per cent) would cancel plans for holidays, a quarter (24 per cent) would resort to downsizing or moving home, a fifth (21 per cent) would have to cut back on food, and another fifth (20 per cent) would be forced to ‘heat or eat’ by cutting down on heating.

What are the average weekly costs we would have, were a financial crisis to arrive?

A Northern Irish family has average weekly household expenditure, including food shopping, of £343, and three quarters of us think it’s getting worse rather than better: we say we are worried about the rising cost of living.

Furthermore, our ability to save is falling. These latest figures by L&G show that Northern Ireland families are able to save an average of £96 a month, but that was down by £35 on figures collected a year earlier.

:: Michael Kennedy is an independent financial adviser and pensions specialist, and can be contacted on 028 71886005