Why is it important to be financially resilient?
Covid-19 has caused a wide-spread economic crisis but furlough, loss of earnings and unemployment has also reinforced how important it is to become financially resilient for the future.
The ability to cope when faced with a sudden fall in income or an unexpected bill is easier said than done.
Even before the Coronavirus, the Money Advice Service estimated that 8.3 million in the UK were over-indebted, and that 22% of UK adults had less than £100 in savings – making them highly vulnerable to a financial shock.
By October 2020, Citizens’ Advice’s data showed that almost six million adults had fallen behind on at least one household bill during the pandemic.
The need to build up a financial buffer has been brought sharply into focus because any form of upheaval — from extended time off from work due to illness or fixing your car after an accident – can happen to anyone at any time.
So how much money should people have squirreled away? As a general rule of thumb, everyone should try and work out their essential outgoings over a three-month period and aim to keep that financial cushion behind them.
Without it many of will be forced into debt, by maxing out a credit card or exceeding an arranged overdraft.
Although credit isn’t a bad thing, unaffordable loans – like those offered by payday lenders or unscrupulous loan sharks – can lead to debt spiralling out of control.
Money worries are a prominent contributor to poor mental health. According to the Money and Mental Health Policy Institute, 86% of people with emotional and mental health problems say their financial situation had had a negative impact on their condition.
To make matters worse, many people tend to suffer in silence. According to a Mind survey on linking work with stress, 19% of respondents had taken a sick day from work because of stress, but 90% gave a different reason for their absence as they did not want to admit the main cause was stress.
Everyone should prepare for sudden expenses by regularly putting money aside.
Once you start saving with a credit union, you’re not just a customer, you’re a member of a successful financial co-operative and have a say on how its run.
Small, regular amounts quickly build up and help you become financially resilient which is central to securing a sound future.