By Daniel Hunter

People in their late thirties, those who are divorced or who have children under 16 are the groups left most financially vulnerable as they bear the brunt of family responsibilities.

New research has shown that the total amount of money family members are giving or lending to children has increased by almost a third (31 per cent) since the financial downturn, in the last five years.

As economic conditions continued to decline, the average amount of money given or loaned to children and grandchildren in the UK is now reported to be an average of £12,846, according to the sixth annual Scottish Widows Savings & Investments Report.

This rise in family lending, as revealed in this year’s report, is having a substantial impact on individuals’ savings, which has led Scottish Widows to identify three especially vulnerable groups, a Risk Triangle of those who are becoming increasingly unable to save money and support their families:

- A quarter of parents with children under 16 have no savings at all, compared to a national average of 19 per cent, and 37 per cent are not currently saving.
- A quarter of Britons aged 35-44 years old also have no savings at all, with 73 per cent of these people saying they have no money available to save.
- Although they do have some savings, 39 per cent of people who are divorced and living alone are currently failing to save anything at all, noticeably higher than the national average of 32 per cent.

“Although these groups aren’t mutually exclusive, what we can discern from the research is that all the points in this ‘Risk Triangle’ have significant family responsibilities," Iain McGowan, Head of Savings and Investments at Scottish Widows said.

"We can see that family giving has risen exponentially, but this is clearly unsustainable. It begs the question, that without taking steps to provide, how will they help their children in another five years through education or onto the property ladder?"

In its sixth annual stock take of the financial resilience of the UK, the Scottish Widows Savings & Investments Report 2012 has identified these most vulnerable groups across three areas: age, family situation and living arrangements. The ‘Risk Triangle’ groups are found to be more likely than the rest of the population to be failing to save, even though they generally have higher incomes.

Worryingly, almost a third of parents with young children (28 per cent) revealed that the value of their savings and investments came to under £2,500; whilst a quarter have nothing at all.

What’s more, 28 per cent of these families said their savings would last less than one month if they were unable to work, which is starkly up on the national average of 20 per cent and carries concerning implications, against the large rise in family lending and an unemployment rate at its highest for 16 years.

Similarly, 27 per cent of those aged 35-44 and divorcees said they had less than £2,500 in savings. 22 per cent of the 35-44 year olds and 27 per cent of divorcees thought their savings would last less than a month if they could not work.

Nothing to spare for ‘luxuries’

Highlighting just how much families are struggling amid these increasing pressures, this year’s Savings & Investments Report also uncovered that more and more people are viewing holidays, home ownership and even family days out as a ‘luxury’.

Over half of people aged 35-44 years old (55 per cent) confirm that taking one holiday a year is an extra cost they can ill-afford, whilst nearly a third of parents with children under 16 years old (32 per cent) call home ownership a luxury.

Over half of these parents (55 per cent) say family days out are also a luxury, indicating just how much this group is being squeezed financially.

Damaging culture of saving for the short term emerges

A further trend identified in this year’s report is the growing savings culture of short-termism, as over half of Britons (53 per cent) are saving for the short-term, or not at all.

Despite 47 per cent saying they are putting money away for the long term or for both the short term and the long term, over two thirds of long term savers (68 per cent) view this time period as under 10 years, showing that people are failing to take a full view of the future. This is further demonstrated by the fact that only a quarter of UK adults believe they are saving enough for their long term needs, with a lack of disposable income being the main barrier to saving.

“We are increasingly seeing people fail to plan properly for the future," Mr McGowan said, explaining this short term attitude.

"When a life stage — whether having children, buying a home or planning for retirement — is so far away, we tend to not take it into account, preferring to focus on the here and now instead. However not only is this misguided, this short-sightedness will cost the current generation dearly, and deliver a huge savings shock further down the line.”

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