Inflation and rising unemployment bite hard at middle class families

Posted on November 17th, 2011 | Categories - News

New research has shown that middle class families have seen their savings fall by around £2,000 over the last three months alone.

The research by the bank, ING Direct, shows that the twin threats of rising inflation and higher unemployment are causing middle class families to see a sharp decline in their savings.

Harder hit

The research, part of ING Direct’s quarterly Consumer Savings Monitor also shows that middle income families are being hit the hardest by current levels of inflation, despite the drop reported earlier this week, because they spend disproportionately more of their income on energy, petrol and food, which have risen in price faster than other goods and services.

Middle income families have seen their savings drop at three times the rate of other groups, because of the twin threats of high inflation and rising unemployment, which are causing many families to have to dip into their savings to meet day to day living expenses.

Richard Doe, chief executive of ING Direct said: “Mid-life parents are losing out to the greatest degree.”

Savings

The bank also found that the average person in Britain has just 35 days of savings in the bank, equal to £1,501; this figure has fallen by £183 over the past three months.

Such a low level of savings will worry many financial experts who recommend that between three and six months savings are held in deposit accounts and are easily accessible in case of a financial emergency.

Even more worryingly four out of 10 people are using savings to meet the cost of day to day living expenses, meaning that already low levels of savings will soon be eroded.

James Knightley, senior economist at ING Direct, said: “In this environment it is unsurprising that many households are running down their savings to finance everyday spending,” he said.

The low level of savings are mainly due to the financial pressures families are currently experiencing, however the low levels of interest payable on many savings accounts are also probably partly to blame, even the best savings interest rates are unattractive at the current time, reducing the incentive to save.