Let’s talk about financial resilience


What is financial resilience?

Financial resilience is the ability to withstand life events that impact your income or any assets you have. Stressful events, such as unemployment, divorce, and health problems can affect people’s financial resilience.

What is financial vulnerability?

According to the FCA, before the pandemic, around 20 million people in the UK displayed one or more signs of vulnerability. Factors behind a vulnerability may be out of our control or not obvious but, they can have an impact on our finances. The FCA identified four areas which may increase the risk of someone becoming financially vulnerable:

Disabilities or illnesses that may affect your ability to carry out daily tasks.

Life events
Major life events such as bereavement, job loss or the breakdown of a relationship.

Low ability to withstand financial or emotional shock.

Low knowledge of financial matters or low confidence in managing money (financial capability) and low capability in other relevant areas such as literacy or digital skills.

How does the FCA define those in financial difficulty?

27% of UK adults now have low financial resilience, up from 20% in February 2020. Those in financial difficulty are people falling behind on their domestic bills or credit commitments. It also includes those who could quickly find themselves in difficulty if they suffer a financial shock, because they have low or erratic income or low savings.What’s interesting to note is that 76% of adults with characteristics of vulnerability do not see themselves as vulnerable. However, adults with poor health are more likely to see themselves as vulnerable than adults who are vulnerable for other reasons.

Why should you improve your financial resilience?

If you’re feeling financially vulnerable it might be a good idea to try and understand why you feel this way. Are you behind on bills or credit commitments? Have you recently gone through a bereavement which has left you in a bad financial position? Do you generally find yourself with a small savings balance? Whatever your situation, it’s important to evaluate it and keep a positive mindset. When you have identified the issue try to focus on improving your situation. It can be easy to think that if it doesn’t change straight away it’s never going to happen, but most change does take time. Try and stick to small changes and see how your situation evolves over time, if you try to make big financial changes quickly it could be more difficult to achieve success.

Our members often want to build their savings, so they have a small amount of money put away for emergency costs or just for peace of mind. If you don’t currently have savings, or find yourself wishing you had more, it might be good to start off by saving just £5 or £10 per month. You can then assess if this manageable within your budget and if it is you could consider increasing the amount, you’re saving so your savings pot grows faster. If you struggle with saving £5 a month, don’t worry, there are tools and resources available to help you. Perhaps look at using a budget planner, this will calculate your disposable income when you input your income and expenditure. It can also highlight areas of overspending that you may be able to cut back on (e.g., Cancelling subscriptions or looking for cheaper phone contracts). Once you’ve made any necessary changes to your finances, you can then look at your disposable income to calculate how much you could comfortably save. Even saving just £5 a month would mean that after 12 months you have accumulated £60!

Start saving today

If you’re keen to get your finances in order then join us today, you can start by saving a minimum of £5 a month, or whatever you’re comfortable with and relax with the knowledge that savings comes straight from your payroll (available in 28 forces). This means no more forgetting to save this month as payday is save day! If you already have an account, you can login to view your savings balance and change the amount you save.


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