One in 10 (10%) adults have no savings to fall back on, potentially leaving them exposed to financial shocks, research suggests.
The findings, from a survey commissioned by the AA of its members, also found 50% of those who agreed to disclose their savings position have less than six months’ basic living expenses saved.
Nearly a third (30%) have less than three months’ expenses available, including those with no savings.
Finance experts often recommend setting aside several months’ worth of essential expenses as an emergency fund to help manage unexpected costs.
But the research suggests a significant proportion of people may struggle to absorb costs such as car repairs, urgent home maintenance or a temporary loss of income without dipping into borrowing or credit.
When asked how they would cover an unexpected bill of £500, one in six (15%) said they would rely on easy access savings.
The proportion who would turn to accessible savings fell to 12% if the unexpected bill was £15,000, and one in 10 (10%) if it was £20,000.
For a £500 bill, 43% of people would use their current account and 31% would use a credit card.
If the bill was £5,000, a quarter (25%) of people said they do not know how they would cover the cost.
This rose to 38% for a £10,000 bill and nearly half (48%) for unexpected costs above £20,000.
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The research also indicated older people are more likely to be able to rely on their current account to cover unexpected bills.
Finance experts often recommend setting aside several months’ worth of essential expenses as an emergency fund to help manage unexpected costs.
Adam Robery, head of loans and savings at The AA, said: “Unexpected costs are a part of life – from urgent car repairs to household bills – but many people don’t yet have a financial cushion in place. Even small, regular contributions could help build a safety net over time.
“Having even a modest emergency fund may help people deal with surprise expenses without immediately turning to borrowing.
“Building an emergency fund doesn’t have to happen overnight. Starting with manageable savings goals and keeping money in an easy access account could help people gradually strengthen their financial resilience.”
The research was carried out by Yonder among more than 13,000 AA members in February.
Here are some suggestions from The AA for building an emergency fund:
1. Set a realistic savings target. It is often suggested that people should aim to build a buffer covering around three to six months’ of essential living costs.
2. Start small and remain consistent. Even modest monthly contributions can build into a meaningful safety net over time.
3. Consider using a separate savings account that can be easily accessed if needed. Keeping emergency savings separate from everyday spending may help to avoid dipping into the fund unnecessarily.
4. Setting up a regular transfer after payday can make saving easier and more consistent.
5. Review your savings regularly. Check that your emergency savings reflect your current living costs and financial situation.