Why financial health should be an ethical and financial priority
Sir Hector Sants, Head of the Department of Money and Pensions (MaPS)
Financial well-being is about knowing you can pay the bills, deal with the unexpected, and stay on track for a healthy financial future. When people feel in control of their money, individuals and communities are healthier, businesses are more prosperous and the economy benefits.
MaPS works, in partnership with organizations across a range of sectors, to improve the financial well-being of people in the UK. Changes in products, services and regulations in the financial services environment are key to building individual capabilities of individuals, as well as ensuring long-term cost savings for the sector.
Financial well-being must be at the center of the conversation within this sector, so that we equip our customers and employees with the skills they need to improve people’s relationship with money throughout their lives.
Financial well-being of individuals
Money can be a very personal stress
Nearly half of people in the UK (44%) say they would be better off financially if they were better taught how to manage their budgets and bills, according to a recent survey.
Many children grow up to be adults without knowing how to budget or understanding basic financial products, while “many adults aren’t even confident about talking about money to family and friends,” says Jessica Howes, Head of Engagement and Reporting for the Business Officer at St. James Place.
If they don’t know the basics, they may put off tackling money issues, exacerbating the problem. According to a 2020 Financial Conduct Authority survey, 37% of adults with low financial ability have struggled to evaluate financial products or find it difficult to shop.
Reform of this work is required by all parts of society. Since 2015, we have provided a financial education program to nearly 40,000 young people. “The younger you start in education, the more tools you have to reach that ultimate goal of financial well-being,” Jessica says. All of this helps relieve anxiety that can paralyze individuals into inaction. Since individuals are the basic building blocks of society, a little education can go a long way.
There are significant regional disparities that affect the way we think and approach our finances
According to our National Financial Well-Being Analysis, which was conducted jointly with the Center for Economics and Business Research (CEBR), those who live in the Southeast are four times more financially healthy than those in Northeast 3 — and have a 20% higher average annual wage. 4
However, Alexandra Loydon, director of partner engagement and consulting at SJP, says, “The higher cost of living in the Southeast means that even those who were relatively affluent have a lower perception of their wealth.”
There are problems in all regions: an unequal economy, where you are either poor or feel poor, and a lack of financial knowledge. The solution is the same: education. For Alexandra, employers need to play their part in empowering workers to feel more comfortable about their finances — but there is more of that support in large, city-based companies, and those in smaller organizations may be more vulnerable.
It is important to improve these areas so that they are on a par with the richer ones, otherwise the financial well-being of the nation will suffer.
Financial worries can affect productivity at work, negatively affecting the entire nation
Across the UK, a third of people feel financially vulnerable, according to a CEBR/SJP 5 analysis – and it can affect the rest of their lives. One in ten misses work due to financial concerns, while nearly one in five say these concerns have affected their productivity.6
One reason is the lack of advice. The numbers of advisors are down drastically – the wealthiest take advantage of the advice while others are left floundering. Andrew Colin Jones, director of business development at SJP, believes that the government should step in to increase the numbers, and with it, people’s sense of security about the money.
“Financial well-being is about feeling confident and in control,” says Tony Clark, Senior Director of Shows at SJP. “It could be creating wealth or dealing with debt — or somewhere in between.”
This feeling of control has an aura effect that can benefit the entire nation. “The most skilled and financially compliant workforce will buy and spend responsibly,” says Harriet Shepherd, Head of CCRO Office at SJP. “There is less potential for getting into debt.”
Debt management takes time and bank mental processing time, which affects productivity. “It affects our nation’s economy and people’s well-being,” Harriet says. By tackling the problem head-on, we can improve the financial health of our nation – and our society.
Effects on society
Laura Peters, Head of Mental Health and Financial Advice at the charity Mental Health UK, sees the consequences of financial problems firsthand every day
What role does financial well-being play in the general well-being of people?
People may find that their mood, concentration, and sleep are affected by stress. Living with a pre-existing mental health condition can affect a person’s ability to plan, make decisions, and communicate, making money management more difficult. The stress of worrying about finances can push those who suffer from mental illness into a crisis.
What kind of financial problems do you see from clients?
Symptoms of mental illness can cause people to struggle for money. For example, a person with bipolar disorder may spend life fervently during the manic phase. Those with poor mental health may avoid dealing with financial problems. This is the time when debt can build up, which can cause further deterioration in mental health – it’s a vicious cycle.
What message should we send to those whose finances negatively affect their mental health?
Don’t try to tackle the whole problem at once – break it down into manageable, short-term goals. And remember you are not alone – support is available. If money worries start to affect your mental health, talk to your GP.
And what can the community do to help?
We should all look out for friends and family. If there are signs that someone is struggling with money and mental health, encourage them to reach out for support. The government must also ensure that people receive the benefits and financial support they need.
For people with poor mental health and financial problems, free and honest advice is available at Mentalhealthandmoneyadvice.org.
An expanded version of this feature was originally published in the Summer 2022 issue of The Investor magazine. You can read the full article over here.
1Half of Brits want urgent help managing their money, new poll results, Center for Social Justice Lowell, January 2022 (based on a sample size of 4,000 people)
2Financial Life Survey 2020: Impact of the Coronavirus, Financial Conduct Authority, February 2021
3UK Financial Health Index, St James Place and Center for Economics and Business Research, December 2021 (total sample size 1,000)
4Hours and Earnings Annual Survey, Office for National Statistics, October 2021 (based on a sample size of 300,000)
5UK Financial Health Index, St James Place and Center for Economics and Business Research, December 2021 (total sample size 1,000)
6Financial well-being and productivity in the workplace, Aegon and Center for Economics and Business Research, November 2021 (based on a sample size of 2,000 employees)
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