British families are enjoying record incomes and falling expenditure yet are still not protecting their incomes, according to Aviva's latest Family Finances Report.
More families are starting to splash out on luxury items such as holidays, leisure goods and satellite television subscriptions, while growing numbers are saving money.
However, this rise in income and fall in expenditure disguises a growing wealth gap, while fears about rising inflation are being replaced with worries about interest rate increases.
A third (31%) of all families have less than £500 in savings, but among single parents, and those who are divorced, widowed or separated, that figure rises to 64% and 46% respectively, the report said.
Household debt is now lower than it has been at any point since November 2011. This debt has frequently exceeded £10,000 over the last three years, and was as high as £12,834 in May 2013. It is now at less than half that maximum level, at £6,354, down £342 in the last six months alone.
While many families in the UK have reduced their overall debts, increasing numbers have taken out a bank overdraft.
Additionally, 29% of people listed ‘serious illness of me / my partner' as one of their main concerns relating to their standard of living. This was the fourth concern after increases in the cost of living (60%), unexpected expenses e.g. home repairs (56%) and losing my job (50%).
However, 36% had life insurance, 11% had critical illness cover and 13% had private medical insurance, Meanwhile just 7% had taken out an income protection policy.
Louise Colley, protection director for Aviva, said: " "These latest figures show how quickly financial situations can change so we'd urge people to take steps to protect themselves against unexpected financial shocks. While some families do appear to be on a firmer footing, an unexpectedly lost income can have huge repercussions, so it's important that people make sure they protect their loved ones' futures."
