Yolt, the smart-thinking money app, has partnered with the Centre for Economics & Business Research (Cebr) to reveal a new category for measuring financial wellbeing: ‘In the Green’, that goes beyond the traditional ‘In the Red’ i.e. being in debt and ‘In the Black’ i.e. living payday to payday.
The research revealed over 9 million people (17% of UK adults) in the UK are already ‘In the Green’. However, an estimated 10.4 million people have not yet established money management habits to bolster their financial security, leaving them exposed to potential ongoing financial shocks.
To be ‘In the Green’, the report outlines criteria, which consider all parts of a person’s financial life, including their financial behaviours, approaches and attitudes. Cebr designed these criteria to be accessible to all income groups, so that being ‘In the Green’ does not necessarily require a high level of income or wealth.
To be ‘In the Green’, someone must meet at least four out of five criteria:
- Save at least 10% of their income each month – 29% of people in the UK currently do this, 71% do not
- Have a high awareness of their spending each month – 58% of people in the UK in the currently have a high aware of their spending, 42% do not
- Review at least half of their ongoing financial commitments (e.g. bills) at least once a year – 46% of people in the UK do this, 54% do not
- Have savings in excess of 20% of their annual income – 23% of people in the UK have this, 77% do not
- Have debt worth less than 5% of annual income, excluding mortgage debt and student loan debt – 52% of people in the UK have these low levels of debt, 48% have more
An estimated 10 million people in the UK currently satisfy three out of the five ‘In the Green’ criteria, meaning that with a few small lifestyles changes they could be maximising their financial potential and be ‘In the Green’. Some UK households have already been prompted to make these changes by the pandemic.
The average household saved more than 22% of their disposable income during the first lockdown back in March. There were also reports of higher than average deposits in current accounts and savings accounts as a result. In May, Yolt data revealed there had been an 82% increase in the amount of money put into savings accounts and a 16% increase put into investment portfolios since February. One in four people in the UK plan to continue to save at least 20% of their post-tax income through 2021. However, recent reports have suggested these savings were primarily experienced by higher-income families, particularly those who benefitted from ‘working from home’ related savings.
Perhaps most concerning in the current economic climate is that over 40% of people in the UK do not have a high awareness of their monthly spending and over 50% of people do not review their financial commitments at least once a year.
Pauline van Brakel, Chief Product Officer at Yolt comments: “2020 was an extremely difficult year for UK households and many people faced and are continuing to face financial challenges. While the outlook for 2021 is still uncertain, we know that now more than ever, it is important to focus on how you can maximise your finances so you can weather any unforeseen shocks.
“Our report found that there were numerous things that could be introduced that would further incentivise financial wellness, particularly with regards to savings volumes. This could include introducing higher average savings rates or the introduction of a system comparable to autoenrollment but for personal savings.
“On a personal basis, simple steps such as reviewing all of your bills and subscriptions, keeping a close eye on your monthly spending, using a pre-paid debit card to keep your spending and savings separate, could help you to save a set amount each month. And attempting to reduce any debt you may have can help build a savings buffer for any uncertainty that lies ahead. We know that a large number of people could become ‘In the Green’ with a few lifestyle changes, and in turn protect themselves from future economic shocks.”