This week’s blog looks at financial wellbeing and is written by Kevin Duffy, Partnerships Manager at Money & Pensions Service whose mission is to ensure everyone in the UK can easily access the information needed to make the right financial decisions throughout life.
Kevin Duffy is a guest speaker at the upcoming RACA Online Information Session on Tuesday 11th May 2021 at 10.00am – 11.15am. Find out more about the event by clicking here.
Even before COVID-19, the Money and Pensions Service (MaPS) found that nine million adults often use credit to buy food or pay bills because money had run out. Kevin Duffy, regional partnership manager for Scotland at MaPS, explores the current state of financial wellbeing, how we’re using credit and what can be done to improve the nation’s personal finances.
Financial wellbeing is about feeling secure and in control of your finances. It benefits individuals, communities, businesses and the economy. It is estimated that the equivalent of £15 billion of turnover is lost each year by employers across the UK due to absenteeism and financial stress (Neyber, 2019).
At MaPS, we help organisations to support the financial wellbeing of their employees, customers and communities through free, impartial money and pensions guidance and a range of tools and content.
The state of Scotland’s financial wellbeing has a real impact on the fabric of our communities and wider society. It is therefore vital that we work together to educate people and bring about the change needed to improve it.
Key measures we use to help track financial wellbeing include figures on saving, use of credit, financial education, pensions and debt. 700,000 people in Scotland are at risk of, or in, problem debt, while 46% do not save regularly (MaPS, 2020). Add in the issues associated with the pandemic such as potential loss of income, ill health or increased household bills, and these people will find it increasingly difficult to build financial resilience. We expect to see a significant rise in demand for money guidance and debt advice throughout 2021.
Credit can help people to balance their spending, but using it regularly to pay for everyday essentials can be a sign of poor financial wellbeing. For some people, the use of credit might be unavoidable, but for others there are choices that can improve their situation.
The Covid-19 crisis has impacted people’s finances in different ways. Those on better salaries have been able to save more, while the poorer and more vulnerable have been hit with redundancy, reductions in income and an increase in debt and borrowing. Payment holidays have helped, but these are short-term measures that don’t address the underlying causes of poor financial wellbeing. A Standard Life survey found that 10% of households were in serious financial difficulty and a further 16% were struggling to make ends meet.
The affordable credit sector has also suffered, with credit unions attempting to strike a balance between the needs of members, particularly those furloughed or made redundant, and responsible lending. They have seen a reduction in loan applications which has led to a loss of income (MaPS, 2020)
No organisation can improve the nation’s financial wellbeing alone – the UK Strategy for Financial Wellbeing is designed to drive change at scale and shift the dials on personal finance. Use of credit and affordable credit form a key part of the ten-year strategy.
As we start turning our attention to life post-Covid, many credit customers will require advocacy and support. Some are claiming social security benefits for the first time and will need assistance to navigate the system, while others will need guidance to reduce costs, start a savings habit or make decisions about their pension.
We would really encourage you to get in touch to see how MaPS can support your business to improve financial wellbeing for your employees or service users. Whether it is supporting you to develop your own financial wellbeing strategy, embedding useful tools and articles on your intranet or website, or taking part in our Talk Money Week campaign which reaches millions of people each year, there are positive steps you can take to support people through these tough times.