Insights ¦ Money on my mind: Understanding the savings, debt and financial resilience of low-to-middle income families

Key Take Aways

1. Wealth, including liquid savings and accessible debt, plays a crucial role in financial resilience for low-to-middle income families, influencing their ability to respond to economic shocks.
2. Two-thirds (64%) of working-age families have less than three months’ income saved, with the disparity widening among the poorest, where 74% lack sufficient liquid savings.
3. Many low-income households hold less than £1,000 in readily accessible savings, with almost half (49%) of the poorest fifth falling below this threshold.
4. Despite some growth, over two-thirds of low-to-middle income households save sporadically or not at all, limiting their capacity for sustainable financial buffering.
5. Debt levels have broadly decreased since the financial crisis, with lower real-terms consumer debt, especially among the poorest, though borrowing costs have increased and credit conditions tightened.
6. Household arrears on priority bills such as energy, Council Tax, and rent have surged, with arrears on energy bills more than doubling over five years, reaching £4.2 billion in Q1 2025.
7. Rising energy and household bill prices, combined with stricter credit regulations, have shifted household financial pressure from consumer debt to arrears on essential bills.
8. During the pandemic and subsequent cost of living crisis, many families reduced consumer debt and maintained savings, but arrears continued to rise, indicating adaptation rather than financial distress.
9. There is a notable income distribution shift, with arrears becoming more prevalent among middle-income households, reversing traditional patterns where arrears were concentrated among the poorest.
10. Interventions such as auto-enrolment sidecar schemes, targeted social tariffs, and enhanced financial education are recommended to bolster financial resilience.
11. Policy focus should include boosting income growth through wages and targeted support, alongside reforms in debt management, arrears handling, and affordability measures.
12. Families employ a pragmatic hierarchy in managing finances — prioritising essential bills and debt repayments over savings, with emotional security often guiding borrowing decisions.

Key Statistics

• 64% of working-age families have less than three months’ income saved.
• 53% of households across the income spectrum have less than £1,000 in liquid savings.
• 49% of the poorest fifth of families hold less than £1,000 in liquid savings.
• The share of families in arrears on at least one major household bill rose from 4% pre-pandemic to over 6% in 2023-24.
• Council Tax arrears in England reached £6.7 billion in 2024-25, a 48% increase since 2019-20.
• Energy bill arrears more than doubled from £1.7 billion in 2019 to £4.2 billion in 2025.
• Average consumer debt per household fell from £2,600 to £2,300 between 2006-08 and 2020-22.
• Median credit card debt among low-to-middle income households dropped from £1,900 to £1,300 during the pandemic period.
• The proportion of households using consumer credit remained steady at around 42-44% during recent years.
• The real value of outstanding bills on utilities increased significantly, with arrears on electricity and gas accounts rising in both number and average debt.
• The share of families behind on utility bills elevated notably among the middle-income groups during the cost of living crisis.
• The percentage of low-to-middle income households saving £10 or more per month increased during the pandemic but remains below half of the population.

Key Discussion Points

• Wealth and liquid assets are fundamental to immediate financial resilience, influencing how families cope with shocks beyond income alone.
• Despite increases during the 2010s, many low-income families still face dangerously low savings, constraining their ability to manage unforeseen expenses.
• Recent trends show a significant reduction in household consumer debt since the financial crisis, particularly among poorer households, but borrowing costs have risen.
• A marked shift from consumer debt to arrears on key household bills signifies adaptive financial responses but entails material risks.
• Rising energy and household bills have driven arrears upward, with energy debts more than doubling, posing questions about affordability and regulatory protections.
• Tighter credit regulation and higher interest rates have led families to delay or avoid new borrowing, often resorting to arrears on essential services.
• There is a worrying trend of arrears increasing among middle-income households, indicating evolving financial vulnerabilities.
• Policy solutions such as auto-enrolment ‘sidecar’ savings schemes and targeted social tariffs could help families build resilience.
• Enhancing financial literacy and early intervention strategies are essential to prevent debt escalation and support informed financial decision-making.
• Addressing the legacy of priority debts, especially energy and Council Tax arrears, requires both immediate relief schemes and long-term structural reforms.
• Wages and household incomes remain critical; without income growth, other measures may only provide limited relief.
• Families employ a pragmatic approach, balancing essential bills, existing debts, and savings, often driven by emotional security rather than pure financial optimisation.

Document Description

This article provides a comprehensive analysis of the financial resilience, savings, and debt management of low-to-middle income families in Britain. Drawing on household survey data and qualitative interviews, it explores recent trends in household savings, consumer debt, and arrears on essential bills amidst economic shocks such as the pandemic and cost of living crisis. The article examines policy implications aimed at boosting financial resilience through income growth, targeted support schemes, and financial education, emphasising a pragmatic view of household financial management shaped by real-world constraints.