Financially shook: 19.8 million people have experienced a financial shock since the pandemic began – with an average decrease in income of £538 per month
Two out of five UK adults (38%) have experienced a financial shock as a result of the pandemic
Those who experienced a financial shock saw their income decrease by £538 per month on average– almost a full week of spending for the average household2 according to the ONS – and equating to £11 billion3 nationally
Over half (51%) of UK consumers have not taken steps to protect themselves against a potential financial shock
New research from Yolt, the award-winning 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 makespeople 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 theirmonthly outgoingstosee where cutbackscanbe 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 totackle 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 20205.
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 tothe 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.”