Tackling poor financial health

At a glance

• The latest Financial Health Index from St. James's Place highlights a huge – and widening – gap between the north and south of the UK when it comes to financial wellbeing.
• There’s also a worryingly small number of people in the UK who have a financial plan – which is key to establishing and maintaining financial health.
• These problems can be helped by improved financial education and more people putting a financial plan in place.

There’s a huge north-south gap in the financial health of the UK, which has widened over the past year. This is a key finding of the latest Financial Health Index,¹ published by St. James's Place.

What’s more, the UK-wide survey reveals that only a third (34%) of adults have a financial plan, falling from 38% last year. This is particularly concerning, as having a financial plan for the future – such as aiming to increase savings or payments into a pension, or buy a property – is key to helping establish and maintain good financial health.

What is financial health?

Financial health is used as an assessment of a person’s overall wellbeing, including how comfortable and resilient they are to pressures on their finances.

And when considering such matters, it’s important to understand the distinction between actual wealth and financial health, says Alexandra Loydon, Director of Partner Engagement and Consultancy at SJP.

“You can have wealth, but you might not necessarily have financial health,” she explains. “The way people manage their lives, and whether they have a financial plan in place, will determine whether they feel they’re financially healthy.”

Is the north-south divide growing?

The Financial Health Index has found huge disparities in the financial health of the UK’s regions. At the top of the league sits the South East of England, with an overall score of 77.2 (up 1.6 on last year), while at the bottom is the North East, with a score of just 11.4 (down 7.7).

Other high-performing regions include the East of England (72.3), the South West (69.9) and London (59.9), all of which have improved since last year’s research was conducted. Others near the bottom of the table include Northern Ireland, Yorkshire and the Humber, and the North West, which have all declined.

The reasons for this north-south divide, and the fact that it’s widening, include the cost-of-living crisis and regional variations in the growth of property prices, which remains one of the key drivers of wealth.

Yet, despite the relative wealth of the south of England, the vast majority of people in the UK (81%) don’t consider themselves wealthy.

“Feeling wealthy is not necessarily driven by how much money you have, but by the perception you have,” says Alexandra. “In the north, people are on average, in real terms, less wealthy than people in the south – but people are still tending to feel the same across the country.”

The benefits of financial education

Alexandra believes that the solutions to the financial-health divide, and our overall lack of financial wellbeing, are twofold: improving financial education across the UK, especially in schools; and in turn, in adulthood understanding the importance of having a financial plan – which can include taking financial advice.

It’s clear that financial advice helps to increase financial wellbeing by helping to improve financial confidence and resilience, says Alexandra. She points to the fact that SJP’s previous Financial Health Index (for 2021) revealed that, of those people who had a financial plan in place, more than three-quarters (78%) said it made them feel more confident about their financial position.

But to increase the overall level of financial planning, it’s vital that financial education is improved in the UK, she argues: “People have to understand why they need a financial plan – and that comes down to education.

“But we currently don’t receive enough education about how to manage money. Too many people are entering the workplace without, for example, understanding what a pension is – and it often boils down to luck. At SJP, we recognise that there is an enormous gap in financial awareness and education, which is why we’re taking measures to help plug that gap.”

For many years, we’ve been running a programme through our Partners and employees to deliver financial education in schools, and we’ve recently teamed up with Young Enterprise to support the accreditation of schools looking to become Centres of Excellence for financial education. “Our work in this area addresses just the tip of the iceberg right now,” says Alexandra. “But over the long term, we hope it will start to help more people.”

She’s also calling for a more coordinated approach across the entire financial services industry. “We need a kind of ‘levelling up’ of financial education, right across the board,” she says. “And we need to be collectively driving the agenda and influencing the government to do more.”

What you can do now

Our primary hope is that the results of the Financial Health Index will prompt people to look at their finances and take action, by creating a financial plan that suits their circumstances and seeking financial advice where appropriate.

“The Index is telling us that people are not sufficiently engaging with their finances, and that there’s a direct correlation between feeling confident about your finances and your health and wellbeing,” says Alexandra.

“Our message is that you need to be on top of your finances; you need to be planning for your future. It's such an important element of your overall wellbeing to ensure that you have a financial plan in place.”

Call us today for help planning your financial future.

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