Millions of UK employees are reliant upon financial plans lasting just a few months (53%) – or even weeks (23%) ahead, accordingtonew research from Fidelity International1.
The research, conducted by Ipsos, explores the attitudes of more than 2,000 UK employees towards their financial circumstances, as recorded in October. The findings reveal the extent to which they feel vulnerable to the current challenges and uncertainties facing the economy – with more than a fifth (22%) worried about their ability to cope with a financial shock.
The research also reveals the level of ‘back-up’ funding that UK employees say they have access to, in the event they were to lose their main source of income. On average, respondents would be able to meet the cost of everyday expenses for up to four months, falling to three months or less for almost half (48%) – and less than a month for one in ten (11%).
The impact of such uncertainty upon overall wellbeing is clear, with more than a fifth (22%) of employees experiencing severe stress as a result of their financial situation – although a total of 81% feel some level of anxiety.
Maike Currie, Investment Director, Workplace Investing at Fidelity International, comments: “Looking back to the start of the year, no-one could have predicted the challenges we would have to face, with many of us experiencing disruption to our lives at home and work. On one level it’s little wonder that people are focused upon their short-term finances and obligations, particularly with further lockdown restrictions introduced earlier this month. However, many longer-term goals may have changed or been postponed as a result.”
Fidelity’s research also reveals the impact of Covid-19 upon workers’ attitudes over the course of the year, with a first survey carried out in March ahead of the introduction of UK lockdown restrictions, allowing for comparison of the latest findings from October2. The findings reveal the number who feel on track to reach their financial goals has fallen from 38% to 35% over the period. Just 15% currently feel completely on track, falling from 18% earlier this year.
Maike Currie continues: “One of the most important steps people can take right now is to make sure they understand their financial situation and identify the areas in which they can take control, whether in their spending, saving or management of investments. Taking these small steps today can help you to understand the choices available to you longer term and provide some peace of mind during times of uncertainty.”
Four steps you can take to feel more in control of your finances:
- Take control of your day-to-day finances – Your budget should cover more than your day-to-day – it’s also a good idea to have contingency savings set aside for any unexpected financial setbacks. Start by aiming to have a contingency savings plan equivalent to one month’s income, and build from there, thinking about how long you could cope if you lost your main source of income.
- Get to know your goals – Understanding your goals is incredibly important, as is writing them down. Even if they change in the future, having them there as a guide will help keep you on track. Your goals may include getting your contingency savings in place, starting a family, saving for a wedding, a new car or your retirement. Whatever they are, it’s important to know exactly what your immediate and long-term priorities are.
- Protect what’s yours – There are steps you can take to protect the savings and investments you accumulate over time. For example, you can protect your pension by making sure your provider knows who you’d like your pension paid to should the worst happen. This is called nominating a beneficiary and can be done by completing an Expression of Wish form. You can nominate one person, or divide it between family, friends and charities.
- Supercharge your savings – When it comes to saving, the longer you contribute, the longer your money will have to grow. This is a way of supercharging your savings using the power of compound interest. This means you earn interest on the interest that has already built up on your savings. This will accumulate over time and can turn a small pot into a significant amount.