Michael Royce, Senior Policy and Propositions Manager at the Money and Pensions Service, shares his thoughts on financial resilience and explores some of the ways to achieve it.
Financial resilience is the ability to recover from financial setbacks and maintain financial stability despite unexpected events. Such events could include job loss, an expensive house purchase or car repair, or a medical emergency.
Financial resilience is similar to financial wellbeing, which is not defined by how much money you have, but instead is around feeling financially secure and in control.
Both financial wellbeing and financial resilience can be achieved on any income: as it’s not about what money you have, it’s about what you do with it– and how prepared you are for the unexpected.
Building an emergency savings pot is a great way to build financial resilience. This way you can use your savings when you suddenly need them without it affecting your everyday finances and leaving you financially unstable.
When building emergency savings, there’s no golden rule for how much you should have as each person’s circumstances will vary.
Saving little and often can be the best way to save, rather than putting aside larger amounts every now and again because it gets you into a savings habit and means you’re more likely to continue saving long-term.
Findings from our 2021 Financial Wellbeing Survey showed that saving is linked to other financial planning behaviours like setting goals. Setting a savings goal and trying to reach it is one of the best things you can do. MoneyHelper’s Savings Calculator can help with this by working out how long it’ll take you to save for something.
Another way to achieve financial resilience on any income is to pay off any debts as soon as you can. This will reduce any financial strain you have and mean that more of your money can contribute to spending for now or saving for later.
Many of us have some everyday debts where you can manage the payments, like manageable mortgage payments. But if you have other debts which have become unmanageable – if you start going without essentials or missing vital payments – it’s time to seek help. The debt advice tool on MoneyHelper can help you find free debt advice near you to help to deal with your debts and start to build your financial resilience.
If you have children, grandchildren, nieces or nephews, there’s no age that’s ‘too young’ to start teaching them about money. MaPS research shows that attitudes and behaviours towards money begin developing around the ages of three and seven.
By starting conversations about money at an early age you can instil good savings and other money habits that can help children develop strong financial wellbeing and financial resilience in later life.
MoneyHelper’s Talk Learn Do provides support for parents and carers in teaching children about money, as well as resources and guides on how to tailor this teaching depending on their age.
