The first “Big Money Index” of 2013 from AXA finds that on top of two years of ‘significant cutbacks’, the next year will force extreme cost-cutting measures on many consumers. Almost two-thirds (64 per cent) of consumers said their purchasing behaviour has changed significantly over two years and one in four believe they face a huge compromise in 2013.
AXA’s twice-yearly report presents a snapshot of financial confidence, behaviour and attitudes as well as views on topical money issues among eight demographic groups.
Already economising to the hilt, 25 per cent of consumers admit they are now ‘in real danger of being forced to make major lifestyle changes in the next 12 months due to financial issues’, such as moving to a cheaper house, giving up a car, holiday or children’s private education or even delaying marriage, children or retirement. Consequently, AXA urges brokers to warn customers thinking of cutting back on insurance of the possible consequences.
Just 18 per cent felt their financial situation would improve in the long-term (rising to a happier 32 per cent among the ever-buoyant younger working sectors of the population) with many consumers feeling forced to put the brakes on saving simply to survive. Almost one in five (18 per cent) had stopped putting money into savings altogether by the end of 2012.
Matthew Reed, Managing Director, Intermediary at AXA Commercial Lines and Personal Intermediary said: “Cutting back on insurance can seem like an easy way of saving some money from the household budget. But it can be a false economy if something then happens, such as a burst pipe, or car accident. Consumers could then face a huge bill, even more than the cost of the insurance paid out in the first place.
“Therefore, as consumers are struggling to get their finances in control, it is a crucial time for brokers to get in touch with existing customers, as well as new ones to help review their finances, and look at their insurance needs. This could alert brokers to any potentially dangerous decisions but could also result in their clients being able to save a few crucial pounds.”
The impact is harsh: one in six (16 per cent) of the UK’s working population admit they would simply “not be able to cover” their financial outgoings for the next three months if they lost their job today, whileone in fivegot into more debt as they “simply could not survive without a large overdraft facility or credit card”.
Scrimping where they can, consumers looked to their household budgets and continued to cut back on the necessities. Even as winter hit, one in five (20 per cent) cut back on using oil, gas and electricity, rising to 35 per cent of Under-funded Seniors. When asked which ONE measure in the Chancellor’s Budget this month would help them most, over a quarter (27 per cent) of respondents chose a freeze on consumption taxes such as fuel duty.
More than one in five (22 per cent) also cut back on food spending, which came close to doubling among The Stretched at 41 per cent. Even the more affluent groups found themselves beginning to change their shopping habits, with more than one in 10 (11 per cent) now going to Pound Shops.
Money (mis-) management: blame the parents?
Consumers felt there was a clear need for people to take more financial responsibility – and that parents should play a more prominent role in equipping them. Indeed, more than half (52 per cent) of 25-34 year-olds said the reason for people struggling to stay afloat was not being taught money management skills by parents. Across all groups, 43 per cent believed people are too disorganised and over a third (38 per cent) blamed lack of money management teaching at school.
Donna Dawson, psychologist specialising in personality and behaviour, commented: “The harsh economic times can make strange bedfellows: even those considered ‘affluent’, are now rubbing shoulders with those considered less well-off in the discount shops and supermarkets along the High Street. There is now a sense that all levels of society are facing the same pain of cutbacks, the same struggle to make ends meet, and the same uncertainty about the future. There is a more communal feel to hardship, reminiscent of the war years, when we were ‘all in it together’. Not feeling alone in financial hardship makes it easier to bear, and allows individuals to develop a better understanding and a more compassionate attitude towards each other.”