New research from Fair4All Finance and Trajectory explores the lived reality of people in financially vulnerable circumstances in the UK revealing over 10m people have cut the amount they save, or have stopped saving completely

We already know that over 20.3m people in the UK are living in financially vulnerable circumstances, whether that’s people who are struggling to get out of debt, using their savings to supplement their income or trying to juggle increases to the cost of living which for many mean they live knowing there’s far more month than money.

We’ve identified three key areas to explore, savings, access to insurance, and credit. In this first deep dive we’ll be looking into the savings habits of those 20.3m people living in financially vulnerable circumstances.

The importance of savings

Holding savings is an important part of financial resilience. Without them there’s little room to maneuverer when unexpected financial shocks arise – and they remove the need to borrow money. It’s equally been proven that savings are better for mental wellbeing, with those who save money sleeping better at night, and are happier with their life overall.

Unfortunately, our latest data paints a worrying picture for those in financially vulnerable circumstances. Over 10 million people tell us they’re saving less money now than they used to or have stopped saving completely. This is particularly worrying for the most financially vulnerable customer groups, who already hold low savings amounts.

Ellie Suckling, Consumer Insights Manager, and our Elle Crossley, Reporting and Insights Analyst, have pulled together all our findings relating to savings.

Here are some of the key takeaways

• Compared to an average of UK adults, those in financially vulnerable circumstances are seeing more changes to their savings habits
• Almost half of people in financially vulnerable circumstances are saving less than they used to, or have stopped saving completely
• 24% of people in financially vulnerable circumstances – over 5 million people
• People in financially vulnerable circumstances have fewer savings products than the rest of UK Adults

Savings amounts

1 in 4 people in financially vulnerable circumstances – 5 million people – hold no savings. What is particularly worrying is the Credit Crisis Families and Forgotten Families customer groups, where half either have no savings, or less than £250.  With such low savings, one financial emergency can put you in a precarious position. The Credit Crisis Families customer group is the most likely to use expensive high-cost credit products too, meaning a financial emergency and a lack of savings could lead to debt accumulation from the need to use high-cost products.

The Un(Golden) year group are more likely to be between the ages of 45 and 65+, with a high number who are retired (40%). The lack of ability to earn, and in some cases an ability to build savings, is a real worry for this customer group.

A closer look at savings patterns

Certain segments of financially vulnerable individuals, such as “Forgotten Families” and “Credit Crisis Families,” typically have lower savings levels. If they were building financial resilience, we would expect to see an increase in savings. However, over a third have not improved their savings habits—many are saving less or have stopped altogether.

The trend can also be seen in our “Squeezed and Sliding” segment. Historically, this group has held the highest level of savings, but they are now saving less than before. While they are managing for now, a single life event could significantly increase their financial vulnerability. Notably, they are also the most likely to use savings to supplement their income too.

Savings Product Ownership

When we look at the types of savings products held by people in financially vulnerable circumstances we can see that in all areas they under index against other UK adults except for one – credit union saving accounts. Those in financially vulnerable circumstances were 1% more likely to have a savings account with a credit union, while they’re 7% less likely to have a savings account with a bank or building society, 13% less likely to have an ISA, and overall 11% more likely to have no savings products at all.

People in financially vulnerable circumstances, overall, are much more likely to hold no savings products too.  The customer groups with the lowest savings amounts, hold the lowest amount of saving products. When someone holds a saving product, we can also see they are more likely to hold savings, with 50% of people in financially vulnerable circumstances who have no savings, also having no savings account. Only 9% of people with a savings account hold no savings.

Driving financial inclusion

We’re working to transform the financial services sector and increase access to fair and affordable products and services for everyone. We’re working across the sector to trial new financial products that we think will make a big difference to people living in financially vulnerable circumstances and researching both the drivers behind financial exclusion and the solutions that work well elsewhere.

We know there’s lots that needs to be done and everyone across the sector has a role to play in driving financial inclusion. Our segmentation research provides organisations with opportunities to better understand and serve their customers through analysis of their financial needs, product ownership, behaviours and broader lifestyle factors.

It’s important that the unique needs of people in financially vulnerable circumstances are understood when creating new products and services.