It revealed monthly incomes fell 2% during the summer, while the average family’s savings dropped 16%.
Aviva’s Family Finances report showed that only one in twenty (5%) families feel completely protected, compared to 7% in January, meaning an overwhelming 95% feel they need more protection.
Almost half (49%) said they were under or unprotected, another increase from 43% in January, while changes to state benefits worried 21% of respondents.
Yet, Aviva found that the proportion of people with a mortgage and life insurance both increased by 1% between January and August to 48% and 40% respectively.
However, 8% of mortgage borrowers have chosen not to take out life insurance.
With high inflation levels, falling incomes and an uncertain economy, families were also more worried about the cost of living rising over the next six months – 64% compared to 57%.
The survey of more than 6,000 people revealed that average family monthly incomes fell to £2,018 in August from £2,062 in May, while over the same period savings tumbled 16% to £982 from £1,163.
This was compounded as families saw annual inflation increase dramatically on essentials such as food (+6.4%) and fuel and lighting (+7.45%).
The decrease in wages appeared to be partially as a result of an 8% decline in women’s monthly income while average savings might have fallen, due to the smaller relative savings pots of some new savers.
More financially vulnerable single parent families were most worried about potential cost of living increases (67%) and they were also most concerned (45%) about losing state benefits.
Aviva said these trends and shifts in opinions highlighted the precarious state of many families’ finances.
Yet, Louise Colley, head of protection for Aviva, said there were some positive signs despite the growing economic fears.
“For example, almost half of all families now acknowledge they are under-protected, which suggests at least a growing awareness of the need to protect themselves,” she said.
“It’s also reassuring to see that some people who had previously not saved have started to put money away – albeit small amounts.”
However, she added: “While people are improving their attitudes to finances, many families – especially single income families – are very vulnerable to a loss of income.
“We therefore urge people to turn this awareness into action and seriously consider some form of protection which can offer peace of mind against the unexpected.”
