A man sat on the sofa with a laptop and a credit card in his hand

Supporting greater financial wellbeing in the cost-of-living crisis

By Dr Lindsey Appleyard and Professor Sally Dibb, Centre for Business in Society

The cost-of-living crisis is caused by prices rising faster than household incomes. The increasing cost of essential items such as housing, food and energy have meant that many people have reduced disposable income and have had to cut back on their outgoings which risk their long-term health and wellbeing. 

Even before this current crisis, figures from the UK Financial Conduct Authority suggested that around half of UK households are financially vulnerable, with little or no savings to fall back on if they suffer a financial shock.  It is no surprise then that millions of individuals and households whose incomes have been severely impacted by the cost-of-living crisis are feeling financially squeezed. So, what can you do to support your financial wellbeing in these challenging times?

Policymakers often suggest that improving financial capability is the solution to improving our financial wellbeing. They argue that educating the public can help us to manage our money well; increase the use of affordable credit, such as from credit unions or Community Development Finance Institutions (CDFIs); and help us to build a savings buffer.

But we argue that individual financial responsibility is only part of the solution. Government, financial services, regulators, employers and service providers, such as energy providers, should all routinely work together to support people in difficult financial times; not just at a time of national crisis.

Taking control of money

Our research findings as part of the Money Advice Service ‘What Works?’ programme showed that financial planning is crucial to protecting our financial wellbeing, including for those on low or fluctuating incomes. In line with other evidence, we also found that the UK public is generally reluctant to discuss money issues. Yet being more open to talking about financial issues can make a big difference, especially in difficult times. Opening up about our money concerns and being ready to have conversations about money, especially with those we care about, can be very empowering.  These conversations can help us to discuss financial priorities, enabling us to set financial and life goals, and find solutions to reduce spending, repay our debts and get into the habit of saving.  Far from being restrictive, these actions play a crucial role in helping to get in control of our money and open-up opportunities to achieve our goals. 

Several other pointers for managing money emerged from our research. These findings are especially pertinent in the current crisis. Knowing how to budget, understanding your day-to-day expenditure, and working out how to save, can help put you more in control of their money. Setting specific financial goals that are tailored to your personal situation, can help you to balance what you want in the short-term with longer-term needs and aspirations. Building a small pot of savings is vital for everyone, even if your income and job look secure at the moment. 

Making small changes

Our research has also shown that most of us can make small manageable changes to our lifestyles, to enable us to make savings in times of need. These changes might include cancelling subscription services that you no longer need, cut back on eating out or takeaways, and shopping around for new deals on household utilities such as broadband, mobile, etc.  Just imagine how much these reductions could give you in savings.

To support people to build their financial wellbeing and resilience, we have developed a free to use App, called MoneySkills, to support people to make small changes to enable them to make a big difference.

The MoneySkills app provides content on budgeting and saving through:

  • short video clips;
  • E-zines; and
  • an interactive budget planner.

MoneySkills provides you with an interactive tool to help manage your finances on the go. You can use it to learn how to budget, set financial goals that help you work towards short or longer-term life goals, or to help you start routinely saving. 

MoneySkills is available free on iOS from the App store or for Android from Google Play Store. A web-based version of the app can be accessed through here: https://www.moneyskillsapp.com/home

Finding a solution to money issues that works for you can be difficult. The Money and Pensions Service has put together some guidance specifically geared to help individuals and businesses navigate the cost-of living crisis: https://www.moneyhelper.org.uk/en/money-troubles/cost-of-living and produced a guide to help you talk about money: https://www.moneyhelper.org.uk/en/family-and-care/talk-money/talking-about-money

Sources of help

If you are in financial difficulty or need specific guidance, there are free, confidential independent organisations that can provide help:

MoneyHelper: https://www.moneyhelper.org.uk/en

Stepchange Debt Charity: https://www.stepchange.org, 0800 138 1111

National Debt Line: https://www.nationaldebtline.org/, 0808 808 4000 

Citizens Advice: https://www.citizensadvice.org.uk/debt-and-money/

Through understanding the impact of organisations’ activities, behaviours and policies, the Centre for Business in Society at Coventry University seeks to promote responsibility, to change behaviours, and to achieve better outcomes for economies, societies and the individual.