According to the UK’s Financial Conduct Authority (FCA), 24% of UK adults have expressed low confidence in handling their money, and 38% admitted to having low knowledge of financial matters.
But as the cost-of-living crisis rumbles on, with precious little relief offered by the Government’s Spring Budget announcement, Gregor Mowat, Co-founder and Co-CEO of Loqbox and part of the Business in the Community’s (BITC) Cost-of-Living Taskforce, shares new ways to make money go further.
Our conversation is shared below.
Crowdfund Insider: How has the economic crisis impacted debt levels in the UK?
Gregor Mowat: The cost of essential goods and services has been steadily rising, outpacing wage growth for many individuals.
Additionally, with wage growth being relatively slow compared to inflation and rising cost of living, many workers are experiencing stagnating pay cheques, and others are facing uncertainty brought about by precarious contracts and the gig economy.
Meanwhile, housing prices, particularly in urban areas and the southeast, have been increasing faster than wages for many years, putting pressure on both renters and potential homeowners as they struggle to afford rents or save for a deposit.
As a result, people in the UK owed £1,838.7 billion at the end of January 2024, up by £8.8 billion from the previous year. This equates to an extra £165.39 worth of debt per UK adult.
Debt levels are compounded by the fact that one in seven (13%) people in the UK have nothing in their savings, and a third (33%) of UK savers would struggle to cover a month’s worth of living expenses if they lost their primary source of income.
Crowdfund Insider: With no end to the current crisis in sight, debt figures are set to rise even further. Recent figures show that in 2024 household unsecured debt is forecast to rise by 11%, and that unsecured debt per UK household is on course to reach a record level of £17,200 by 2026.
Was there any help from the Spring Budget?
Gregor Mowat: Unfortunately not, however, some changes will have positive impact for those on low incomes, providing limited support for those most in need during the ongoing cost-of-living crisis.
The Household Support Fund (HSF) – which is money given to all local councils to support vulnerable households in their area – was due to end on 31 March, but the Spring Budget granted local councils an additional six months of HSF funding. Furthermore, the government’s ‘budgeting advance loan’ for people on Universal Credit facing an emergency lack of money has seen its repayment period of 12 months double to two years.
Chancellor Jeremy Hunt also delivered on the widely expected 2% cut to national insurance, which he called a ‘tax cut for working people’. However, the tax burden for low earners may well remain higher than it was a few years ago.
It was a disheartening budget for those trying to save more, and the UK economy feels less than certain. But when it comes to boosting savings, the best course of action is to take proactive steps towards improved financial well-being.
Crowdfund Insider: Is BNPL contributing to debt issues?
Gregor Mowat: Buy Now, Pay Later (BNPL) services can be a double-edged sword when it comes to debt. While they offer flexibility and convenience to consumers by allowing them to spread out payments over time, if not used responsibly, BNPL can indeed exacerbate debt problems.
Recent analysis of Bank of England data found that around 3.1 million households owe £2.7 billion in BNPL borrowing. The study showed that 68% of BNPL users are concerned about their borrowing and that they are more likely to fall behind on repayments by two months or more.
While it’s never been easier to access credit via a BNPL service, users should be wary. Making too many impulse purchases or managing multiple loans at once can significantly increase your monthly expenses. This might lead to missing repayment deadlines or quickly accumulating debt.
While some credit lenders provide clear and straightforward terms, others intentionally use confusing language in their agreements, hoping people won’t bother to read them. This can result in unexpected late payment fees, boosting the lender’s revenues. If you do use BNPL to manage your finances, be sure to carefully review and understand the terms. Keep a close eye on accruing interest, high APRs, and potential late payment fees. It’s essential to know what you’re signing up for to avoid any surprises later on. Adopting a Save Now, Buy Later mindset for non-urgent purchases that can wait can make it easier to achieve specific financial goals.
Crowdfund Insider: What advice do you have for people to boost their savings and increase financial stability?
Gregor Mowat: Start with a thorough understanding of what’s coming in and what’s going out every month. This will help identify areas where cutbacks can be made. Just making slight reductions to grocery spending each week can lead to huge savings over the course of a few months.
I also recommend switching long-standing utility contracts to ensure you’re on the cheapest tariffs on the market and reviewing any subscriptions. Streaming services in particular can seem like great deals until you lose track of them. Review which subscriptions you actually use and be wary of limited trials, since they usually need payment details to proceed, and it’s easy to forget to stop the payment in time.
If you don’t already, separate the money you spend on your daily needs from the money you intend to save. This means setting up a designated savings account to minimise the temptation to dip into savings funds to cover daily expenses.
Crowdfund Insider: What personal finance management tools can help?
Gregor Mowat: There are some great tools out there to help with money maintenance, including some that help people build their credit score while they save. Loqbox products are a great example, giving customers a way to improve their credit score or grow their savings. We offer two tiers of membership to suit every level of savings goal. Lite membership is free and comes with fantastic benefits including access to Loqbox Save and Loqbox Coach, as well as valuable tips to help members enhance their financial wellbeing.
Members can save more with Full membership, both in terms of developing a savings habit or saving on credit deals by having a better score. For example, Loqbox can save the average Full member up to £50,000 in reduced interest costs over 25 years of using an average UK basket of credit.
By getting to grips with personal finances and taking advantage of the tools available, families can save hundreds, get on a firmer financial footing, and overcome the financial pressures of rising costs and stagnant incomes.
