Why do Only 18% of UK Consumers Seek Advice as Their Financial Health Rapidly Deteriorates?

Recent macroeconomic and geopolitical issues across the globe have hit consumers where it hurts the most: their wallets. As a huge number of people continue to grapple with a drastically increased cost of living, many have seen their financial health significantly worsen.

In the UK, 29 per cent of adults reported that their financial health has deteriorated over the past six months alone, according to new research from data and payments fintech Moneyhub.

Although the UK’s inflation rate has settled back down to the two per cent target set by the Bank of England, consumers are still feeling the pinch from the all-time high inflation experienced over the 18 months. Of those whose financial health has worsened, nearly two-thirds (63 per cent) cited rising bills as the main driver, while 60 per cent cited inflation as a significant factor.

Despite these economic challenges, only 18 per cent of those individuals who have seen their financial health worsen have spoken to their financial services provider, highlighting a concerning trend when it comes to people seeking advice.

Of those who hadn’t approached their financial services providers, 43 per cent said it was because they didn’t believe the provider would be able to offer any support, and a further 13 per cent were concerned about being penalised.

These findings are especially worrying alongside new research from Shepherds Friendly, which found that, while 87 per cent of Brits feel confident in their financial knowledge, just 49 per cent of people in the UK passed the financial literacy test. With only 51 per cent of people in its survey of 2,000 passing the test, it is clear there are substantial gaps in Britain’s financial literacy.

It also revealed that 60 per cent of Brits believe that financial education should be a mandatory part of the school curriculum. This comes as it found that 56 per cent of respondents regret not saving enough when they were younger, 47 per cent regret not investing money sooner, and 43 per cent regret not teaching themselves more about money topics.

Are UK adults overreliant on credit?

A lack of financial education in the UK isn’t just making it harder for adults to improve their current situation amidst rising costs, it is also deepening the hole they find themselves in. Moneyhub revealed concern that many people who rely on credit to pay their bills will get stuck in a cycle of debt without support from financial providers.

Twelve per cent of people identifying themselves as ‘stretched’, with no money left after necessary expenditure, and 19 per cent of those identifying as ‘struggling’, who can’t afford their necessary outgoings, rely on credit to afford their basic needs. Seven per cent of both groups also said they have recently taken out a high interest personal loan to help afford their basic needs.

While so many need enhanced levels of financial support, 23 per cent of adults in the UK say having a bank branch near to where they live is important when deciding who to bank with, CRIF, the European provider of consumer and credit information, has found.

Sara Costantini, regional director for UK & Ireland at CRIF

“The way in which we manage our finances is changing, and nowhere is this clearer than in the UK. Brits of all ages are placing less importance on this when choosing a bank,” explained Sara Costantini, regional director, UK and Ireland at CRIF. “We know that the UK is the leader in financial services and communication technology in the European area. This, coupled with the ongoing closures of branches, has fuelled the embrace of digital banking.

“Yet this poses challenges for banks and other financial providers, who must not only adapt to meet growing digital demands but do so in a way that meets high expectations for tailored services and products, while maintaining more traditional services to support all existing clients.”

Changing the narrative

With so many people unsure about how to improve their current situations, Graham Drummond, head of communications at Shepherds Friendly, shares advice on how to improve financial literacy.

Graham Drummond, head of communications at Shepherds Friendly

“Our survey showed that many people are unsure about things like budgeting, investing, and understanding financial products that can help them prepare for the future, such as ISAs and investing. It’s not just about knowing the terms, but really feeling confident in making decisions that affect our financial well-being. To close these knowledge gaps, we believe it’s crucial to start teaching financial literacy in schools and continue promoting it throughout our lives.

“Whether you’re looking to improve your money skills or just starting out with building up your savings, there are plenty of ways to learn. You can explore online resources, join a workshop, or chat with a financial advisor. By boosting our financial knowledge, we can all make smarter choices, feel more secure, and build a better future for ourselves and our families.”

Suzanne Homewood, managing director at Moneyhub

Suzanne Homewood, managing director of decisioning at Moneyhub, explains why she thinks open banking technology could be key to helping financial firms detect the early signs of financial vulnerability and better support struggling consumers.

“While we cannot change the macro-economic environment, the financial services industry can take meaningful steps to support customers better.

“Understanding the full scope of a customer’s financial world allows for timely interventions that can prevent issues from spiralling out of control. By leveraging data and technology, service providers are able to have a comprehensive view of their customers’ financial behaviours and world, enabling them to spot issues early and provide the necessary support to help the individual get back on track, positively impacting financial health even in challenging times.”

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