- Real disposable income is still lower than before the pandemic, but we’ve cut our spending so hard that our overall financial resilience has improved.
- The average household has £235 at the end of the month, over twice the pre-pandemic level of £110, and the proportion with enough emergency savings* has risen from 47% to 65%.
- However, single households have missed out on a massive chunk of the recovery their coupled-up counterparts have seen in the past few years – and have seen their resilience improve far less.
- They have just £40 left at the end of the month, up £5 from their pre-pandemic level of £35, but £345 lower than households headed by a couple (£385). The proportion with enough savings has only increased from 37% to 47%, compared to couples who saw them rise from 52% to 73%.
- This is despite the fact they’re spending less than their coupled-up counterparts on the nice-to-haves – and comes down to the fact they’re forced to spend more on the essentials.
- Single parent households are particularly badly off. On average they have £50 left at the end of the month, and only around one in four have enough emergency savings* (26%).
Figures are from the latest edition of the HL Savings & Resilience Barometer. It also found:
- Lower earners, renters and those who have had to remortgage while rates have been higher are also struggling.
- There are worrying pension gaps, and things are set to get worse again this year
*Enough emergency savings is classed as having enough savings to cover at least 3 months’ worth of essential spending – the minimum recommended by advisers.
Sarah Coles, head of personal finance, Hargreaves Lansdown:
“UK households have knocked money management out of the park. Real disposable income is down since before the pandemic, but people have cut spending hard enough that overall financial resilience has improved. This is an impressive result. It means that, as wages grow ahead of inflation, more households have a chance to get back on track.
But the improvements haven’t reached into everyone’s finances yet. As life gets easier for some people, it continues to feel like one impossibly difficult thing after another for others. Single people haven’t benefited from the recovery anywhere near as much as those in a couple.
Lumpy resilience
The HL Savings & Resilience Barometer shows on average people score 61 out of 100 for resilience, up 4 points from 2019, but down 2 points since the peak of resilience during the pandemic – when higher resilience was driven largely by lockdown savings.
Additional savings are largely responsible for the improvement in resilience. On average, around two thirds (65%) of households have enough emergency savings, compared to before the pandemic when it was less than half (47%). And we can expect those savings to build, because people have more cash left at the end of the month – at £235 – over twice the pre-pandemic level of £110.
However, not every aspect of our finances has had a boost. How prepared people are for retirement has actually worsened over this period, and the gap between the pensions we need and those we have has grown.
At the same time, not everyone has been able to build more savings.The benefits have been felt disproportionately by higher earners. If you split earners into ten groups depending on how much they earn, those in the groups four from the bottom to eighth from the bottom have seen savings scores rise 20 points, while the lowest earners saw them rise just 1.3 points.
The singles tax
Single people are still facing massive financial challenges. They’re shouldering all the household costs alone, which is always going to be more difficult, especially given how much more we’re spending on things like rent and energy bills than we were in 2019. They also pay the singles tax, which means that even though they get through half as much as a couple, they face much higher costs.
They’re spending disproportionately on essentials. On average, a single adult spends £8,100 to cover the cost of housing, bills and groceries, marginally higher than the equivalent average per person spend for a couple (£7,800). As a fraction of their net income, however, the difference is much larger – 36% compared to 29%.
It means they have to scrimp and save on the nice-to haves. For example, each member of a couple spends £1,800 on restaurants & hotels, 30% higher than a single adult. Similarly, couples spend £1,950 per person, on average, on recreation and culture, nearly 20% higher than a single adult.
Single parents suffer particularly harshly, partly because they either cannot work, or have to add childcare to the burden of costs they face alone. Some 72% have poor or very poor financial resilience – twice the average rate. On average they have £50 left at the end of the month, and only around one in four have enough emergency savings* (26%). They’re also more likely to be behind on bills or debt repayments. Almost a third are (32%) compared to a national average of less than one in ten (9%)
Renters
Renters are wrestling with runaway rental costs. They also tend to be younger and on lower incomes, so rent hikes are hitting harder. As a result, more than half (54%) have poor or very poor resilience. They also only have enough savings to cover two weeks’ worth of essential spending on average – when the minimum recommended is three months’ worth.
Remortgagers
Remortgaging has taken a toll a toll. One in 5 (18%) of those who have remortgaged onto a higher rate between the end of 2022 and the middle of 2024 have poor or very poor financial resilience, compared to around one in ten (12%) of those yet to remortgage. Remortgagers have also seen the money they have left over at the end of the month fall to £315 – £95 less than those who are yet to remortgage. However, both groups of homeowners are better off that renters – 54% of whom have poor or very poor financial resilience.”
