15% of households couldn't cope with a financial emergency

RTÉ News​

23-05-2025

How would your household deal with an unexpected financial emergency costing €1000?
That was a question posed as part of this month's Credit Union Consumer Sentiment survey.
Just over a third of consumers say that they would use savings, while 18% say they would use their income, and 15% say they would be unable to cope with an unexpected expense or bill.
Asking about people's capacity to weather a financial emergency has been part of the survey for the past five years, and is based on a similar question asked in the regular "Report on the Economic Well-Being of US households" conducted each year by the US Federal Reserve.
The findings show the share of Irish consumers resorting to savings has been trending down in the past two years from the 2023 peak of 44%.
Economist Austin Hughes says the slightly reduced reliance on savings in the 2025 survey could reflect the fact that some consumers have drawn down Covid-era savings or required them for other purposes such as a deposit for a house purchase.
"It may also be that, in a more uncertain environment, that some consumers are trying to build a higher level of precautionary or long-term savings," he said.
"As the overall level of household deposits has continued to increase, these results might also be consistent with a greater concentration of savings in wealthier households of late."
As might be expected, there was a strong positive correlation between income and capacity to use savings in a financial emergency in the 2025 survey.
Over 65's were the age group most likely to draw on savings, followed by those aged 25 to 34, perhaps reflecting less family-related financial commitments in these demographics. Those aged under 25 tended not to say they would use savings.
The results also show a small increase in those who say they would use their income to handle a financial emergency to just under one in five consumers or 18%.
"There has been a modest trend increase in reliance on incomes through the past six years that may reflect benefits from a resilient economy and an easing in cost-of-living strains for some consumers. Some element of this uptick could also reflect a switch necessitated by depleted or spoken-for savings," Mr Hughes said.
The age group most likely to draw on their incomes in a financial emergency were the under 25's, followed by the over 65's - "a result that may speak of widely differing income circumstances within these age groups".
A significant 15% of Irish consumers say they would be unable to cope with a financial emergency costing €1000 in 2025.
The economist said while this is lower than the peak 17% share reported in 2023, it still represents a higher share than the 7% of consumers who said they would be unable to handle a financial emergency costing €1000 in the 2021 survey.
"In that respect, it suggests continuing strains on household finances in Ireland from the recent cost-of-living crisis," he said.
"It may be worth trying to reconcile the incidence of this response in the 2025 survey with a clear improvement in overall 'macro' conditions in the Irish economy through the past year," he said.
"While aggregate household income increased in 'real' or inflation-adjusted terms, the number of households is likely to have increased faster, meaning that, on average, household spending power has declined," the economist stated.
Mr Hughes said, while inflation has eased over the past year, it has started to pick up again in recent months, and far more importantly, consumer prices have not retraced any of the sharp increases of recent years.
"In these circumstances, it is not entirely surprising that significant numbers of Irish consumers say they would struggle to cope with a financial emergency at present," he said.
Those on higher incomes are less likely to say they could not handle a financial emergency in the 2025 survey as are those who say they are currently making ends meet with ease. This response was altogether more common among females than males.
It was also most common among those aged between 45 and 64, while those aged 65 and over were the demographic least likely to give this response, which Mr Hughes said it perhaps suggests a heavy burden of 'fixed' household costs among the middle-aged leaving many with little capacity to cope with the unexpected.
While there are relatively small numbers of consumers in most other categories of responses, the survey suggests a somewhat greater incidence of reliance on financial lenders other than on banks and credit unions, or on credit cards.
"This response was more prevalent among those on low incomes and those facing difficulties making ends meet. This might hint at the worrisome sight of a small but not insignificant group of consumers who are both cash and credit-constrained. The very small number who would resort to selling something would also fall under this heading."
Overall, the 2025 'financial emergency' survey would seem to emphasise an important if often overlooked consideration in relation to the circumstances of the Irish consumer at present, Mr Hughes said.
"Financial circumstances continue to vary markedly across Irish households. While that may not appear surprising, it counters the widely adopted economic assumption of the 'representative agent' which implies that a rising 'macro' tide must inevitably lift all boats. In that regard, it sheds light on why, in a 'Great' Irish economy, consumer sentiment suggests so many consumers may be 'grumpy'," he stated.
"From a policy perspective, these survey findings run counter to the widely heard argument that lower inflation and rising aggregate incomes mean that further fiscal supports are no longer required," he said.
"Beyond the immediate strains highlighted in the survey, the evidence at home, and, in many instances, more dangerously abroad, is that economic and social fracture is damaging and destabilising. Those framing Budget '26 need to be conscious that trade threats are not the only challenge the Irish economy faces at present," he concluded.