A bill too far: could you cover a surprise £500?

One in three middle-class adults said they would need to borrow money to pay


A bill to far: Could you cover a surprise £500

An unexpected bill is never welcome, but new research has found even those who appear relatively comfortable would struggle to cover the cost.

In a poll for The Times by YouGov, one in three middle-class adults – those classified as ABC1 workers - said they would need to borrow money to pay a surprise £500 bill. For those who are unemployed or manual workers (C2DE workers), the number rises to almost half (46%) who would struggle. In total, it's two in five (38%) who wouldn't be able to afford the bill.

The young also would struggle, with half (49%) of those aged 18 to 24 unable to cover £500 bill.

For one in seven (14%) it's even harder to find the money when needed, with a surprise £100 bill unaffordable.

Behind a lack of savings

The need to borrow to cover this cost shows a struggle to save.

Part of the problem is a lack of disposable income, with high rent and increased cost of living at odds with stagnant wages. This leaves less money to put aside for emergencies.

Another issue is debt, with the YouGov survey finding 48% of all UK households were in debt (excluding mortgages).

Of course, for some it also highlights a "spend today rather than worry about tomorrow" mentality.

How to build an emergency buffer

The danger of borrowing to cover emergency costs is that it can lead to debt, so having some savings available for the unexpected is sound advice.

Work out where your money goes

First, you need to find the money – but that might not be as hard as you think. Taking half an hour to complete a detailed budget, and there are online tools to help you do this, should give you a clearer sense of where your money goes.

Once you have this, you can look for places you can cut back. Or you may find you aren't even aware just how much money you are spending.

Organise your bills to help keep control

Try to have all your bills come at the same time, just after you are paid, so you have a clearer idea of your disposable income for the rest of the month.

With the money left, set up a standing order to transfer a regular amount to your savings account. Again, this will help you avoid spending the money on other things.

Other ways to cover emergencies

Even with an emergency fund, there can be costs you struggle to afford – particularly big life changing events such as illness or redundancy.

If you're worried about how you would cope if you couldn't work, even with some savings, you might want to consider some form of protection insurance. These won't be right for everyone, so be sure to read what's covered and what isn't.

Borrowing money can still be an option if you're confident you have a way to pay it back. Work out how you'll repay the money, and how much it will cost you, before you commit to taking the cash.

This article is provided by the Money Advice Service.

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