We’re living on the edge and too many are about to fall

For many households across the UK, the cost-of-living crisis never really went away – it just became a permanent feature of daily life.

According to Royal London’s latest Financial Resilience Report, nearly one in 10 adults are now either in a financial crisis or teetering dangerously close to one.

And with 20% of UK adults holding less than £100 in cash savings, it’s no exaggeration to say that millions are living one unexpected bill away from disaster.

The findings are a reminder of the fragile state of household finances in 2025. Even as headline inflation has eased and wage growth shows signs of life, the pressures on individual households remain intense.

Behind the numbers lies a painful reality: daily sacrifices, dwindling savings and a growing sense of anxiety about the future.

MID-LIFE SQUEEZE

Nowhere is this financial strain more pronounced than among 30–49-year-olds – the so-called “mid-lifers.”

Juggling mortgages, childcare and aging parents, many in this group are simply stretched too thin.

Royal London’s report shows that just 41% of mid-lifers are satisfied with their standard of living, while a staggering 16% are either in crisis or just on the cusp of one.

Almost half (47%) of parents with children under 18 say they are feeling the financial pinch or worse. In response, many are cutting back on heating, meals, and social activities – not as part of a budgeting plan but out of sheer necessity.

This isn't belt-tightening. It’s survival.

HIGH HOUSING COSTS

Housing costs are a key culprit. For renters, especially those living alone, the squeeze is relentless. Nearly three-quarters (72%) of single-person household renters saw their housing costs rise in the year to February 2025 by an average of £218 a month.

For those in the private rental sector, the monthly increase was an eye-watering £304.

Mortgage holders haven’t been spared either. Over half of mortgage borrowers have seen their monthly costs rise, with those living alone paying nearly £300 more each month than they were a year ago.

This rising tide of housing expense is drowning those who have no one to split the cost with and it’s steadily eroding the limited financial resilience many had managed to build up.

SLIGHT RECOVERY

The proportion of adults who say they have money left over at the end of the month has increased from 49% last year to 59% today.

Average cash savings are also up slightly, now standing at £15,864 per person. But those average masks sharp inequalities and doesn’t help the one in five people who remain dangerously close to empty.

Encouragingly, despite the income squeeze, just 5% of adults reduced or stopped contributing to their pension in the last year.

However, nearly 70% of adults don’t know how much is in their defined contribution pension pot and over half haven’t even begun to consider how much they’ll need for retirement. That is a recipe for crisis – just a slower-moving one.

DEEPENING DIVIDE

Sarah Pennells, consumer finance specialist at Royal London, says: “We’re seeing a big divide between those who can absorb higher costs and those making daily sacrifices – cutting back on essentials, dipping into their savings or going overdrawn at the end of the month.”

If that all sounds doom and gloom it’s not meant to but it’s important to grapple these issues head on and there’s some handy tips underneath to help you do just that.

But remember, smart choices start with expert advice – speak to your adviser to get the best for your financial future.

TIPS TO SORT YOUR FINANCES

1. See if you can save money on bills. Household bills make up a big part of most households’ spending. You may be able to get a cheaper deal and take advantage of social tariffs.

2. Plan properly for rising costs. Try not to rely solely on savings. If you don’t already have a budget, then consider setting one up. Factor in inflation. Even those who are comfortable now may face financial strain as income drops in retirement, and if costs rise further. You can use a spreadsheet, a budgeting app or make a note on your phone.

3. Create a savings buffer. Higher bills make it harder for people who live on their own to build up savings but without any savings you may have to borrow (possibly at a high interest rate) if you have an unexpected bill or can’t work due to illness.

4. Consider how you would cope with a life shock. No one wants to think about being unable to work for a long time due to illness or dying unexpectedly. However, this can have profound financial, as well as emotional, consequences. If you’re employed, see what benefits your employer offers (death in service, for example). Calculate how long you could pay your bills for if you or your partner couldn’t work and consider protection plans (income protection, critical illness or life insurance).

5. Think long term. When would you like to retire and what would retirement look like for you? Check your State Pension forecast (which you can do on Gov.uk or the HMRC app).