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Guest blog: Lack of financial resilience impacts your wealth – and your health

By Yorkshire Building Society.

Originally published in BSA Society Matters magazine.
 

Originally published in BSA Society Matters magazine.SM53.png

It’s pretty obvious that saving is good for your finances – self-evidently, being able to access cash when you need it is one of the first steps to budgeting, managing money and building wealth.

Perhaps more surprising is the growing evidence to suggest that financial resilience can also impact our health and well-being.
 

A national issue

Low financial resilience has become a national issue:

  • A quarter of the UK’s working population - 7.5 million people – have no savings at all.
  • One in three people have less than £500 in savings, whilst seven out of 10 save less than £100 a month.
  • A third of households regularly run out of money before payday.

As a nation, we’re amongst the worst at saving in Europe, with households putting away just 4.5% of their disposable incomes and comparing unfavourably with the likes of Luxembourg and Sweden, who save 22% and 17.6% respectively.

There’s clear evidence that low financial resilience can have an impact on mental health. Research shows that money worries are very common - two in five working people say they’re worried about their finances, and people say they worry about their bank balances more their relationships, their career or even their health.

Those with money worries are almost five times more likely to suffer from depression, almost nine times more likely to have sleepless nights and almost four times more likely to suffer from panic attacks.
 

How can businesses step in?

For businesses, money worries can reduce workers’ effectiveness, which naturally has an impact on productivity levels. Employers have a duty of care to their people, and I believe that extends to protecting their financial wellbeing.

That’s why we’ve embraced that responsibility and are open about the challenges: research among our own colleagues last year showed that 12% have no savings at all and 7% were kept up at night due to financial worries.

Although that’s lower than the national average, it still represents a significant proportion of our workforce. We want to address this so we’ve introduced a financial well-being programme, and worked alongside Salary Finance to introduce a new direct-from-salary savings option to give our colleagues a new way of putting money away.

The scheme enables staff to put away a set amount of their salary into a savings account each payday. Because it is deducted before the salary ever hits their current account, staff are saving almost without realising. Saving becomes easier, and a habit is forged as they naturally get used to managing their finances without having to think about saving.

We’ve won awards in recognition of this work and now we’re encouraging other employers to take the opportunity to make a difference.

I am also delighted that the BSA has established a Savings Taskforce, which I am chairing, to ensure that getting people to save is more of a priority for the industry as a whole.

We will also be taking steps in the coming months to make sure that employers outside financial services are aware of the issues surrounding saving and how they can help their people to improve their personal financial resilience through saving.

We’re committed to getting the UK saving and Yorkshire Building Society has set a target: get 1.8m to save over the next five years. We want other businesses everywhere to help us establish saving as a good habit making people healthier, more productive and more resilient.

 

Read the Society Matters autumn 2019 edition here.