Blog: Building financial resilience through saving  

In tough times many people can turn to financial safety nets like savings, credit cards or an overdraft at affordable rates. But for the 20.3m people living in financially vulnerable circumstances across the UK these options are often out of reach. And with nearly one in three families in Britain having less than £1,000 in savings, there is a pressing need to address this gap in financial resilience.

Key insights from our segmentation research:

• 30% of people living in financially vulnerable circumstances don’t currently hold any form of savings
• 34% are saving less than they used to
• 31% of people said that during the last two years they had to rely on their savings as their income
• 40% of people who do save told us they were saving to meet an unexpected bill or expense

Credit unions encourage savings

Having savings to fall back on a is crucial part of building financial resilience. Without this buffer people can find themselves tipped into financial vulnerability and at a greater risk of predatory practices from illegal moneylenders.

The ability to save provides security and peace of mind. And it reduces stress, particularly for those dealing with anxiety or depression. We saw evidence of this in our ‘Empowering Lives’ report, which explored the social impact of Merseyside credit unions.  

From the research, we learned that regular savings steadily increased among members, with half making consistent payments of £20 or more. Even those saving smaller amounts did so regularly. Most of the savings were aimed at building a safety net for emergencies or securing access to credit, rather than for immediate purchases.

‘This is the first time [saving], because obviously being on my own with three kids in the house, and only my income, it’s hard because everything was going on the kids or into the house. Being on my own with the kids meant there was no extra money, so literally every penny was spent.’
– Heather, 45-54

We conducted this research with the support of five credit unions who serve members across Merseyside, exploring the social and economic role of credit unions, and the impact of being a member of trusted, stable, reliable community finance organisations, especially at a time of considerable uncertainty for many households.

Credit unions deliver impact for people who are both financially included and excluded. Their positive impact is seen on women, across the income spectrum, on renters and owner occupiers, on disabled people and on ethically and community motivated members.

Importantly, those members with savings behind them reported greater metal health, self-esteem and confidence.

The right products and services

We know that positive product offers like deduction based lending can make a huge difference to people who might otherwise struggle to save.

‘I didn’t actually have much in the way of savings. But I have now.’
Case study 1, Payroll Loan borrower at Clockwise Credit Union

Our research ‘Deduction Lending – Does it all add up for low income earners?’ looked into non profit community organisations delivering payroll and benefit deduction lending. We found that 73% of people who had a loan where payments were deducted directly from their payroll were saving more regularly – this compares to just 63% of those with standard loan agreements with credit unions.

We concluded that deductions lending helps foster financial improvements and wider health and wellbeing benefits while encouraging positive saving behaviours.

Another example of a service that encourages saving can be seen through Nest insight’s workplace sidecar savings tool which has seen participating households reporting a £384 median emergency savings after 12 months enrolment, as well as improved pension contributions.

Employees that have signed up have developed new savings habits, with 99% of savings pots still active after 18 months.

Working together to build resilience

The above examples show that the right products and services can help people get started on savings and build their financial resilience. We’d love to see more financial services organisations adopt these practices and trial innovations of their own. We also think there’s merit in exploring how the current Help to Save scheme could be tweaked and improved for lower income linked savings.

At Fair4All Finance, we believe that everyone should have access to the right financial products and services, whenever they need them. Savings are just one part of the financial resilience puzzle, and there’s a need to boost access to affordable credit and insurance and protection products too.

We know it will take the combined skills of the whole industry, government and regulators to shift the dial on financial inclusion. We’ll keep working to bring people together to make that happen.