‘I think about money all the time… I lay in bed thinking about it, struggling to sleep’ – Mental Health Awareness Week 2023

According to our Segmentation research there are at least 17.5m people in the UK living in the spectrum of financial vulnerability, from ‘unsteady starters’ who have flexible incomes and who are at the start of their financial lives, the ‘squeezed and sliding’ who are just about managing their debts or using borrowing and savings to make ends meet, to the ‘forgotten families’ who have very low incomes and low levels of savings, often living in poverty.

Of this 17.5m people, 65% of those have told us that money is a constant source of worry and anxiety.

When we drill further down into the data we see that almost 1 in 3 (31%) people across our 6 segments experience mental health challenges compared to just 20% of the general population. And it is a worrying spiral with money worries causing anxiety, and anxiety then making it more difficult for those in financial difficulty to seek help.

‘I have a lot of debt but my general anxiety forced me to avoid confronting it head on. I have anxiety attacks when the problem seems to surmount and becomes overwhelming at times’

Unsteady starters – from interview

The impacts of the cost of living crisis on our financial lives are showing no signs of retreat, with food, energy and other living expenses constantly fluctuating.

A recent survey by the Mental Health Foundation found that this year alone, 73% of those asked said that they had felt anxious about money in the past two weeks, and 86% of respondents to a Money and Mental Health survey with experience of mental health problems said that their financial situation had made their mental health problems worse.

‘Constantly seeing how much more money is leaving my account than coming in due to the increased cost of everything is worrying. It becomes a heavy burden, worrying until payday to sort everything out’

Unsteady starter – from interview

What causes financial anxiety?

There are many reasons why people might be worried about money, including:

  • No to low income
  • High levels of unaffordable debt or interest
  • Insecure employment
  • Unexpected essential expenses

It’s also more complex than simply whether someone has a low income or lacks savings, with the Resolution Foundation recently noting that one of the important differences in how people are weathering the cost of living crisis is in the coping mechanisms that they are being forced to use to get by.

The report made clear associations with the depletion of mental health of those with extreme or unsustainable coping mechanisms (such as going further into debt or cutting back on food), which low-income families were more likely to have.

‘I think about money all the time. From the moment I wake up until the time I lay in bed thinking about it, struggling to sleep’

Squeezed and sliding – from interview

What can be done to support people in financially vulnerable circumstances?

Our mission is to make the financial services industry fairer for everyone. It’s a big job and not one that we’re able to do fully on our own.

The community finance sector already does a lot to support those in financially vulnerable circumstances, our aim is to support and grow the sector to allow for more affordable lending to take place across all of England.

Increasing people’s income

Tackling missed income is also an area that we’re focusing on. Updated figures show there are £19bn in unclaimed benefit entitlements and missed social tariffs – we’re working with tech providers, local authorities, and other financial service providers to ensure that benefit and grant calculators are embedded into their customer journeys. This means that identifying any lost income would become a standard part of any credit or loan application process, potentially unlocking on average just over £400 per month per household in lost income.

New products and services, built with the user in mind

We think there’s space for new products and services in the market that are aimed specifically at those in financially vulnerable circumstances, and we’re working with providers to trial these so we can make the case for full scale rollouts. Our No Interest Loan scheme trial for example means that those who are locked out of interest baring loans can still access the lending they need, without the need to pay interest, or approach illegal money lenders.

Working together to change the system

Like we said earlier, we can’t do it alone and there needs to be collective effort from the whole system, including mainstream finance, government, and regulators to make full scale systemic change. We’re working to bring those together and have formed the Financial Inclusion Action Group to look at how we can do this to tackle these issues from all angles.

Finding out what works and what can be replicated

We’re also looking to identify – through research – examples of what mainstream finance has got right, and where it can be replicated. Our ‘Banking response to Covid-19’ report identified several support measures that were introduced by banks during the pandemic to help alleviate money worries, and saw 76% of bank customers say their financial position was positively affected because of the support measures provided by banks.

Helping you better serve your members and customers

Finally, our Segmentation model has been designed specifically to identify the different challenges and experiences facing the wide spectrum of people in financially vulnerable circumstances, and can help financial service providers to further understand and identify the different groups of people they are serving, or where there is an opportunity to serve them.

You can read more about our segmentation of those in financially vulnerable circumstances, including the other 3 segments ‘credit crisis families’, ‘difficult debts’ and ‘(un)golden years’ on our Segmentation hub.

Until the financial services industry is truly fair and affordable, it will continue to be a key influencer on people’s mental health.

If you’d like to know more information on any of the projects we’re working on please contact us at hello@fair4allfinance.org.uk or keep up to date with what we’re up to by signing up to our newsletter.

Attention: We have been informed of fraudulent activity where people are offering unsecured loans using our name.

Please be careful as we do not provide loans or contact customers for this purpose. If you've been approached, please report to Action Fraud immediately via their website or on 0300 123 2040.