Most UK residents vastly underestimate the cost of their monthly outgoings, by as much as £964 for an average family, according to new data from UK income protection insurance provider Bright Grey*.
The research underlines the dire need for guidance and financial advice in the general area of budgeting and financial planning, with most families underestimating their own ‘running costs’ by 50%.
Of over 2,000 adults surveyed, the average claimed monthly expenditure per family was £1,037. However, a formal tot-up of their actual outgoings revealed a true figure of £2,001, a difference of £964.
Couples without children seem just as disorganised in their personal finances, with an average estimated spend of £900 per month falling far short of their actual spend of £1,634.
Need for Accident, Sickness & Unemployment Insurance (ASU Insurance)
Bright Grey had commissioned the survey to ask consumers how long they and their household could survive on a redundancy payout of £10,000. Based on the highly conservative estimates of their outgoings detailed above, their predictions for how long they could subsist on the payout were equally unrealistic.
While most believed that £10,000 would last 10 months, the figures above reveal that, for the typical family, 5 months is a more likely figure.
Furthermore, the report indicated that 38% of the UK’s working population could survive just one month on their savings alone.
The report reveals the need for accident, sickness & unemployment insurance (ASU insurance), which offers short-term assistance in paying bills in the event of redundancy, accident or ill-health.
ASU cover usually begins one month after the end of employment, and lasts for a limited period of 12-24 months.
*Source: The Reality Gap Report, Bright Grey 2009
