Do you have any financial concerns for this new year, 2022?
New research from insurer Aegon found that 32% of UK adults are prioritising building up their emergency cash savings, with financial uncertainty following the pandemic promoting this savings habit.
A cash emergency fund is an essential foundation for sound financial planning, providing a cushion against unexpected money-related shocks. We often refer to a cash savings fund as ‘rainy day money’, and having this safety net in place can differentiate between a minor annoyance and financial crisis.
Another critical element of sound financial planning is to clear the expensive short-term debt.
The recent decision by the Bank of England to hike interest rates from 0.1% to 0.25% will get more of us thinking about debt repayment as the cost of borrowing becomes more expensive.
According to the research, 16% of adults want to pay off their short-term debt in 2022, with members of the Millennial generation and Generation X more likely to want to clear their debts next year.
The ability to cover an unexpected expense was the top financial concern identified by the researchers, with 34% of adults concerned about this risk.
Worrying about unexpected expenditure was highest for the over 55s, with 37% of this age group expressing this as their primary concern for 2022.
Other money worries as we head into the New Year included paying for basic living expenses (23%) and a lack of savings (22%).
The pandemic has been a polarised experience, in financial terms, for people in the UK.
Some have experienced reduced expenditure while maintaining their income, and others have seen a temporary or permanent decrease in their spending power due to the economic decline.
The research highlights that nearly a quarter (23%) of adults whose job was impacted by the pandemic have less money saved than they did pre-pandemic.
Kate Smith, Head of Pensions at Aegon, said:
“It is encouraging that individuals are looking to prioritise building financial resilience in the coming year. While some have managed to save more during the pandemic, others have faced significant financial difficulty, particularly if they have experienced a permanent or temporary fall in income. Some of these will have dipped into their savings to provide short-term relief, but those without a financial safety net could have found themselves exposed as being underprepared to cover any unexpected expense.
“Acknowledging the need to build financial resilience is a good first step but it should be followed by action. A simple way to do this is through budgeting, by mapping your monthly incomings and outgoings and making regular payments to an easily accessible savings fund.
“The general financial uncertainty created by the pandemic has highlighted the importance of financial resilience. Going into a new year with fresh uncertainty surrounding the coronavirus crisis, developing good budgeting skills and savings habits and growing emergency funds will give peace of mind and help to build financial resilience for any future unexpected expense.”