Brits rather sacrifice savings than make lifestyle cutbacks

Meeting the cost of a comfortable lifestyle is a bigger financial concern than dwindling savings for the nation, with 6.7 million people happy to raid their savings and investments to cover day-to-day outgoings, according to a study by LV=.

The LV= ‘Look After What You Love Index' tracks people's key life priorities and how their financial concerns and actions match up to these. The research reveals that the pressures of recession have forced nearly two thirds (64%) of people to reassess their life priorities over recent months, with spending ‘quality time' with loved ones, plus family and personal health now top of the list.

However, in spite of people's clear focus on the simple priorities in life, the LV= study shows the majority are taking precious little action to protect and provide for the things they love most. Whilst maintaining current income is the nation's fourth highest priority, and one in three (33%) fear this could be impacted by the financial crisis, just 4% of adults say they have taken out their own insurance to replace their income if they were to become ill and unable to work. Moreover, only a third of adults (33%) have savings on deposit to act as a safety net and a quarter (25%) have cut their insurance or started using their savings to help make ends meet.

Mike Rogers, LV= group chief executive, said: "Rather than doing away with valuable insurance or eating into savings, it is important for people to take stock of their financial situation. Everyone can take some financial steps, however small, towards protecting the things they love most in life. For example, insuring the breadwinners in the family for loss of income will make only a modest impact on most people's finances, yet can provide vital assistance if the worst should happen."

The study reveals that people's actions often don't match their priorities. Seven out of ten people (70%) have home contents insurance, in line with the nation's sixth biggest priority ‘home security'. Yet fewer than one in twenty (4%) have taken out their own insurance to replace lost income, despite this being the UK's fourth highest life priority. With family and personal health both in the nation's top three priorities, the lack of insurance to cover income in case of ill health shows Britons are not putting their money where their mouth is.

Mike Rogers continued: "It's a concern that three times more people have pet insurance than have income protection cover, and only one in ten of us have critical illness insurance. Ideally people should protect all of the important things that they love in their lives, but our study shows their actions don't match their words. This may be due to lack of awareness or a mistaken belief that protecting income and health is very costly. Whatever the reason, now is the time for people to review what financial protection they have in place to cover their key life priorities, and take action to bridge any gaps.