New research from Yolt, the smart money app reveals that almost 20 million UK adults have experienced a financial shock, such as a pay decrease, job loss or a drastic change in financial situation, since the beginning of the pandemic. Those who have had to deal with a financial shock saw their income decrease by over £530 per month on average – which almost equates to one full week of spending for the average family in the UK, according to the Office for National Statistics (ONS). Despite this, over half (51%) of UK consumers revealed they have not taken steps to protect themselves against a sudden change in income, or a shift in their finances that would mean they couldn’t cover their usual outgoings.
The research found that in many cases (19%) people had seen their income decrease and one in ten (11%) have been furloughed during the pandemic. In responses to these shocks, over a third (34%) have dipped into their savings and a quarter have turned to credit card spending (26%). One in five people who experienced a financial shock (20%) tried to raise money by selling things online and one in seven (16%) borrowed money from their family.
Experiencing a financial shock makes people much more likely to put precautions in place in the future, as three out of four (74%) who had previously experienced a financial shock have taken action – compared to a third (33%) who hadn’t faced a shock. Amongst all UK adults, these preventative steps included, reviewing their monthly outgoings to see where cutbacks can be made (23%), putting money aside in a rainy day fund (15%) and a focused approach to paying off debts (12%) to help ease financial pressure. In fact, one in four of Brits (25%) said that the pandemic has made them finally look to tackle their debt – as evidenced by recent data from the Bank of England which found that UK households repaid a total of £16.6bn on credit cards and loans in 2020.
Financial uncertainty continues to fuel consumer anxiety in the UK. Almost two out of five UK adults (38%) are extremely worried about their financial future and half (54%) want to protect their family financially more now, than ever before.
Pauline van Brakel, Chief Product Officer at Yolt, said: “Our research shows that the impact of the pandemic on people’s finances has been far-reaching. There is no uniform financial experience or response to the current economic climate and we’re unfortunately seeing a widening wealth gap, with some people able to save during this period, as the opportunity to spend has declined, and other people unfortunately having suffered a significant reduction in income at an average cost of £538 per month.
“With the UK still experiencing great levels of uncertainty there could be further financial shocks on the horizon for many – especially with government support schemes such as furlough due to come to an end in the coming months. It’s no doubt a challenging time for all but engaging with your finances and looking to see where you could make cutbacks to save even a small financial cushion can be a lifeline if you do experience a financial shock. At Yolt, our recently launched evolution of the app is designed to help you manage your finances and take the hassle out of saving – by helping people save while they spend and making creating savings habits easier.”
