Family savings under most pressure for seven years as coronavirus bites

Family finances are under pressure (Image: Getty Images)

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Working age households' savings pots came under the biggest squeeze since 2013 during the last three months of 2020, according to a report.

The decline largely reflects sustained pressure on incomes from employment during the coronavirus pandemic, according to the Scottish Widows household finance index.

The "savings index" part of the study produced a score of 44.0 in the final quarter of 2020, pointing to a sharp decrease in the amount of savings at households' disposal. It marked the lowest score since the fourth quarter of 2013, when the score was 43.4.

To produce the savings score, people are asked how their levels of household savings have changed compared with a month earlier.

Readings above 50 in the index signal an improvement and ones below 50 indicate that the situation is getting worse.

More people are pulling money from their savings
(Image: Getty Images/iStockphoto)

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The research also indicates that households are finding it harder to save for longer term goals, such as retirement, because of the need to prioritise immediate spending needs during the coronavirus pandemic.

A fifth (20%) of people reported that they were saving less money towards their retirement in the fourth quarter of the year, while only 10% reported an increase.

More than a third (36%) of people said they are currently saving for emergencies.

Looking at how long household savings would last to pay for essentials, 22% of households would only have enough money saved to cover bills for less than a month, and less than half (40%) would be able to cover essentials such as food and accommodation for more than six months, the research found.

Jackie Leiper, workplace savings director at Scottish Widows, said: "The continued pressure on families' financial resilience and lack of protection leaves people in danger of saving less for the long-term and more for emergencies due to uncertainty over the immediate future."

Some 4,500 people aged 18 to 64 were surveyed across Britain between October and December.