The challenging reality for many people of having to make ends meet on benefits during the pandemic was further underlined by the widespread calls ahead of the Budget for the government to retain the ‘temporary’ £20 uplift to universal credit. This has now been extended for another six months and will be paid to the end of September.
It has become clear that the lowest monthly standard allowance of £342.72 for single claimants under 25 provides a minimal amount to live on. With unemployment continuing to rise and given the precarious state of the economy, it is now more important than ever to build your own financial safety net against illness, accident or redundancy.
Save for a rainy day
The Covid-19 crisis has highlighted how ‘safe’ jobs and incomes can disappear with little or no warning when economic conditions change. Emergency ‘rainy day’ savings can help cover mortgage payments and other bills. How much you set aside will depend on individual circumstances, but a good rule of thumb is to have enough savings to cover three months of essential bills as a financial buffer. The best savings account for this purpose is likely to be the one that gives you easy access.
Insure your life and income
While savings can provide a short-term stop gap, insurance provides a more effective safety net against the financial consequences of death or serious illness. For families, life insurance is the most basic financial building block, paying out a lump sum on death, which can help to pay off a mortgage and other debts and also set up a fund to provide a replacement income. Life cover is relatively cheap and will be especially beneficial compared to the very minimal benefits that the state provides.
Income protection insurance can provide valuable support if you find yourself unable to work because of ill health. The typical payout is two-thirds of your income, although there is usually a ‘deferral period’ of three or six months before benefits are paid. These payments are more generous than statutory sick pay, which pays just £95.85 a week for up to 28 weeks.
Production
