The FCA recently published the results of its largest ever consumer and finance tracking survey. Entitled Financial Lives, the survey reveals the financial situations of 13,000 consumers over the age of 18, who were interviewed online and face-to-face in order to understand their personal experiences of financial services and products.
Each of these consumers was placed into one of six age groups: 18-24-year olds, 25‑34-year olds, 35‑44-year olds, 45‑54-year olds, 55‑64-year olds and people aged 65 and over. The survey was designed to see whether there are differences in the way these age groups deal with their finances, as well as to identify potential risk, in line with the FCA’s Mission.
The findings of the Financial Lives Survey
The Financial Lives Survey uncovered a vast amount of information, and Grovelands will be covering more statistics over a series of blog posts. For now, we’ll take a look at the main themes:
One of the most significant statistics showed that a huge 50% of the consumers surveyed display at least one characteristic of potential financial vulnerability.
Some of these vulnerabilities included rising bills, with 47% of rent payers saying that if their rent rose by just £100 per month, they would struggle to pay it. It’s no surprise then, that these people showing financial vulnerability traits were twice as likely to apply for high-cost credit, though not all of them would be eligible to receive it, with 7% saying they have been declined a financial product during the last two years.
The number of financially vulnerable people increased with age, with 69% of over 75s and 77% of over 85s showing signs of potential financial vulnerability. This comes after the results of the FCA’s Ageing Population Project demonstrated that consumers aged over 75 were often excluded from a number of important financial services such as insurance, leaving them at risk.
24% of people surveyed for Financial Lives admitted that they had little to no idea of how to manage their money, and 46% assessed said that they don’t know very much about financial matters. This is a concerningly high number of people who are using financial products and services without really understanding how they work.
Of all the age groups surveyed, the 18-24-year olds rated themselves with the lowest financial knowledge, indicating that the youngest UK generation is in need of extra financial guidance. This is something that firms could focus on when dealing with this age group.
The survey showed that 75% of UK adults had taken out credit in the last 12 months, and of these, 25% had been overdrawn, and 5% had taken out high-cost loans including payday loans which can often command interest rates of up to 40%. This indicates that many consumers are at financial risk, making them more vulnerable to being taken advantage of by rogue firms.
Of the consumers surveyed, 6% of people were in current financial difficulty due to not being able to meet their bills and credit payments. The age group to admit that they were suffering most with financial difficulty was 25-34-year olds (13%).
While many people choose to take out a loan or official overdraft, many opt to borrow informally from friends or family and 6% of people surveyed had done so in the last 12 months. Nearly 1.5% of the surveyed consumers had even gone so far to take out a loan from an unregulated firm.
Again, this indicates an issue with consumers who are unaware of how to manage their finances and either unaware of or overlooking the risks involved in informal and unregulated borrowing. This shows an area for improvement from firms, who could take this chance to focus on educating these groups, encouraging them to borrow safely.
Nearly 18.5% of people said that they didn’t have enough information to make an educated choice on which services they opted for, and a further 18.5% said that they would always go for the cheapest option. Again, there is room for the financial services industry to reach out to this demographic and give them the information they need to make appropriate choices with regards to their finances.
With such vast amounts of data, it is early days to make general assumptions over the financial lives of UK citizens, and Grovelands will continue to report on the data, but for now it can be seen that there is room for more education surrounding financial products and services, particularly for the youngest and oldest citizens. This will not only benefit consumers, but also the firms themselves who can access a wider demographic who might not have bought their services before.