Before COVID-19, we knew that one in five people (21% of UK adults) were not putting any of their monthly income into savings.
This crisis, amongst other things, has highlighted that anyone can become financially vulnerable at any time and financial safety nets, such as savings, are an important consideration.
While millions across the UK have unfortunately suffered a drop in income, through job losses, furlough or a decline in business revenue, others continue to earn their normal wage and are even saving money as a result of decreased spending.
One of the key challenges facing those who have suffered a decrease in their monthly income will be achieving financial stability in the short-term. For those who had a reserve pot in place, this process will be easier, but when we’re thinking about those that didn’t, we must ask ourselves why.
We know that a large number of people, over half of UK adults in fact, rely on extra cash to see them through to their next paycheck. This will be for a whole host of reasons – but, to me, when considering how to make people financially resilient, we must address the issue of financial literacy.
That means, having an active understanding of how to manage cash and debt, and plan effectively for the future.
There has been notable effort over recent years to ensure that consumers are as educated as possible when it comes to their financial wellbeing. And, there’s also great examples of financial institutions trying to solve the much more complex problem of removing the invisible barriers of the banking system.
As things currently stand, the UK has 1.5m unbanked citizens who don’t have access to financial services, if we’re ever to achieve financial resilience as a society, everyone must have a fair start.
Whilst there is a clear direction of travel, the path to resolving the issues highlighted by this crisis in terms of ensuring that we are all financially resilient, is very complex. A more imminent, and hopeful, solution involves a reinvigoration of the savings culture, or perhaps lack thereof, in the UK.
Research from Aviva has found that, to some extent, this is already the case, with some households saving £162 a week on average by not commuting, eating out or spending on leisure activities. And separate data from the Bank of England shows that household cash deposits have increased by more than £13bn.
Those that have been fortunate enough to have remained financially stable during COVID-19, or perhaps even achieved a decrease in spending, must be encouraged to consider using these savings to create building blocks for a more stable future. And, if they can, spur on others who are able, to appreciate the importance of financial safety nets, and lead the way in reinforcing a more positive culture around savings.