A large number of Irish households would be unable to cope with an unexpected bill of €1,000.
That’s according to the Credit Union’s latest consumer sentiment survey which found that just over half (56%) of consumers would use their savings if they were hit by a sudden bill.
However, the survey found that one in four would either not be able to cope with an unexpected expense and would have to either sell something or borrow the money to pay for it.
Amongst the potential unexpected bills that households could face including car repairs or replacing the likes of a washing machine.
Economist Austin Hughes, who oversees the compiling of the survey for the Credit Union, said the responses indicate that there is a three-tier structure when it comes to household finances. He described these as the comfortable, the coping and those who are clinging on.
He said the responses showed there was a “widely varying capacity to handle an unexpected expense.”
The financially “comfortable” households tend to maintain a high level of rainy-day or precautionary savings, he said, before going on to calculate that the wealthiest 20% of households hold about 60% of household savings.
“The average deposit of the wealthiest households is more than 14 times the size of the average deposit of households in the bottom half of the wealth distribution,” Mr Hughes said.
“For these reasons, the survey results question mooted if Government saving-support schemes are the best use of fiscal resources at present,” he said.
The survey found the over 65s were more likely to be able to draw on savings to cope with a €1,000 bill out of the blue. One in seven respondents would use a credit card, take out a credit union or a bank loan to pay an unexpected bill.
“Those with difficulty making ends meet were two-and-a-half times more likely to borrow than those without problems in this regard,” Mr Hughes said.
One in eight would not be able to cope with a financial emergency costing €1,000.
“Those reporting difficulty making ends meet are nearly seven times more likely to say they couldn’t cope with a financial emergency than those without current problems,” said Austin.
When those who could not cope with an unexpected expense are combined with those who would borrow money, or sell something, it amounts to 24pc of respondents.
“Roughly one in four Irish consumers might be considered to be ‘clinging on’,” Mr Hughes said.
“This grouping includes those who say they could not handle a financial emergency at present as well as those who would resort to borrowing from a lender other than a bank or credit union and those who would sell something.”
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