Much has been written about the potentially devastating impact of the Coronavirus outbreak on people’s finances. There are very broadly two groups. The “newly vulnerable” who experience a dramatic drop in income, for example, those who used to earn a middle income or lost their job but now depend on Universal Credit and some of those who have been furloughed and have experienced a short term drop in income. The “known vulnerable” who were already struggling before the outbreak and likely to be even worse off now, for example, low-income households with debts that now depend on Universal Credit.
What has been talked about less is how this has affected people’s financial wellbeing and what kind of support people need as a result.
Even before the Coronavirus outbreak, financial capability levels across the UK were not as high as might have expected. In the OECD/INFE 2016 Survey of Adult Financial Literacy competencies in which 29 countries participated, the UK was ranked 15th, which was below the average for OECD countries and well below France, Norway, and Austria.
Financial capability is a set of attitudes and abilities that enable someone to manage their money well day to day, plan for the future and ultimately lead to financial wellbeing. Someone who experiences financial wellbeing is able to live adequately within means, has longer term financial security and feels confident in their shorter and longer term financial situation .
Here is our analysis that draws on our research on financial capability support over the past twelve years and how services need to adapt to support people during and after Covid-19.
How has Covid-19 impacted on people’s financial capability?
Access to help and information
People’s access to help is an important element and first step towards financial wellbeing but our research has shown that there are multiple barriers for people needing access to financial advice and guidance.
Services currently offering financial capability support are likely to be under considerable pressure due to the outbreak. Most services are charities and could be experiencing a loss of income, staff shortages and an increase in demand for help
There continues to be stigma in accessing financial advice and our research shows that this is a major barrier and prevents people dealing with their problems which then leads them into multiple crises
People who need financial advice are likely to also experience reduced mental wellbeing and by not accessing help earlier contribute to making their mental health problems worse through increased stress and worry.
Knowledge of products and services
Knowledge around financial products and services is another important element of financial capability but in our experience, people need help to find and have help to navigate what is on offer. This means that their key worker or frontline advisor has to have the knowledge, skills, and confidence to provide help and this means providing them with quality training and support, particularly on emerging welfare reforms.
People will need help to understand what benefits and other kinds of support (free school meals, foodbank referrals etc.) are available to them. Accessing these types of support will help maximise people’s income, but our research reiterates how difficult it is to navigate the welfare system and that sometimes it is easier to disengage than have to work with multiple services.
There will be many people who have never applied for benefits before and as new welfare measures have been introduced people will really need help to understand what they are entitled to and how to access it.
People will also need advice around understanding how they can avoid, resolve, or reduce problem debt given their changed financial circumstances particularly those that have used payment holidays on their rent, mortgage, or household bills.
Having the right mindset
Motivation and attitude are other core elements of financial capability such as taking up advice and support, showing willingness to change behaviour and most of all having the confidence and resources to make and sustain a change in the way in which people manage their money.
Our research has shown time and again that even though people know what support is available to them and how to access it, they do not necessarily take it up. This might be due to the stigma attached and because people feel that it is just “not for them”. Age UK recently reported that four out of ten of the poorest pensioners in Scotland were not claiming relevant benefits to boost their weekly income . They may also be living a chaotic life and therefore not be in a position to make a change.
What these issues illustrate is that financial capability is a complex issue. It’s not simply providing one-off support, it’s about building knowledge, skills and confidence and helping people navigate their journey.
How can services help people manage their financial crises?
Integrating financial capability support into other types of support such as housing or health services can be an effective way to reach a wider group of people, especially those who are reluctant to access help (see our evaluation of Shelter Scotland’s Healthy Finances Pilot).
It also means that people can receive support from someone they already trust, and our research clearly shows that a trustful relationship makes it more likely that people take up the support and actually follow the advice they receive.
This can be a challenge as we shift from providing services from face to face to online, remote support. Our experience has shown that people need a mix of support and wholly relying on a tech platform to provide advice runs the risk of people disengaging and not getting the help they need.
There are many really helpful digital resources people just need some help and time to work through them with someone they trust.
Working in partnership
Financial capability issues interact closely with a range of other issues including mental and physical health, housing issues and food insecurity. Services that focus on these issues and do not offer financial capability support themselves need to work with advice services, establish referral pathways, identify people who might need support and encourage them to access support through warm handovers.
We have learnt that direct introductions and follow up are key to a successful referral and positive outcome.
Building the confidence and skills of frontline staff
Staff who have not provided financial capability support before or are out of date with latest welfare reforms need training on how to do it well. This should include training on communication and listening skills that enable staff to build a trustful relationship with clients to make their support more effective.
Our experience has shown that the confidence and capability of staff to help people are major contributing factors in improving people’s access, knowledge, and mindset to achieving financial capability (see our evaluation of the Life, Money, Action! training course)
Being aware of economic abuse
We have also identified that more staff need to learn how to spot the signs of economic abuse as the factors that currently lead to an increase in domestic abuse are likely to also lead to an increase in economic abuse. In these circumstances special care needs to be taken and typical financial capability support could lead to further harm.
We are currently working with Surviving Economic Abuse to evaluate how tailored training can help staff make sure they are providing the right type and level of support.
We need to remain realistic about what people can achieve. Some people will find themselves in a situation where their outgoings for essentials such as rent, utilities and food outstrip their income . For many of them it won’t be possible in the near future to find a cheaper place or keep up with essential bills or put anything into savings.
The best financial capability support cannot resolve gaps in income and will not always enable people to behave in financially capable ways despite their best efforts.
The road to financial wellbeing is not linear.
Our research has shown that when facing both positive and challenging life transitions such as losing a job, moving home, relationship breakdown or going to college, people’s financial wellbeing can become compromised.
How people cope and manage during these transitions can make all the difference to their financial outlook – being resilient, getting help when they need it and having the skills to manage their situation are key. This will help them as they move from managing the now to thinking about their longer term future wellbeing.
 Based on the Money Advice Service’s Financial Capability Adult Outcomes Framework available at https://www.fincap.org.uk/en/articles/adults-outcomes-framework
 Here are some interesting examples detailing what someone will receive under the new welfare measures and how this compares to their outgoings: https://www.theguardian.com/money/2020/apr/11/universal-credit-how-claim-coronavirus-lay-offs-benefits