In Focus: Vulnerability  

Lack of financial planning 'risks 10m livelihoods'

Lack of financial planning 'risks 10m livelihoods'

Warning bells have been sounded over a lack of budgeting and financial planning in the UK as research suggests more than 10m consumers would be unable to cover a single month of outgoings if they lost their current source of income.

Research from financial coaching app Claro showed 10.5m Britons — or one in five of the UK adult population — had no financial cushion whatsoever.

Claro polled nearly 2,000 consumers in December 2020 and found the trend was more prevalent in the younger generation, with one in three (31 per cent) 18 to 24 year olds unable to last the month if they were to lose their job.

Some 16 per cent of this demographic had not made any attempt to save money in 2020 at all, while 41 per cent had seen their income fall short of their living costs over the year.

But the data shows it was not just younger people struggling to save. Almost four in 10 British households (39 per cent) did not budget or keep track of income and expenses.

Rachel Harte, head of financial planning at Claro, said: “While we never want people to obsess about finances, it is concerning that 10.5m adults in the UK have no financial safety net to fall back on - and even more worrying that it is the youngest generation struggling the most.

“It is good for [younger people] to start making good money habits early. A little forward planning goes a long way and can prevent unnecessary stress in the future.”

The warning comes as the number of payroll employees has tumbled by more than 800,000 since the start of the coronavirus pandemic.

Figures from the Office for National Statistics show a large increase in the unemployment rate, estimated at 5 per cent at the tail end of 2020 compared to 3.8 per cent a year before.

In the three months to November 2020, the redundancy rate reached a record high of 14.2 per thousand.

There are fears the unemployment rate could spike higher once the support of the furlough scheme comes to an end.

Ms Harte pointed to savings habits as a good habit to get into, noting that “the smallest amount put aside regularly can eventually build up”, as well as insurance products such as income protection.

She added: “Making small sacrifices here or there to build this up is infinitely preferable to finding yourself out of work without a safety net.”

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