Five out of six people are in a position to improve their financial wellbeing by changing their mental mindset, according to new research from Aegon.
The research, based on responses from 10,000 people and covering more than 1.3m data points, highlights the key problems that are holding back 45m UK individuals from improving their mindset on money matters, with the most widespread matter being the lack of a financial plan to achieve long-term goals, a problem for 87 per cent of the population.
Aegon’s research uses a methodology which places an equal weighting on money factors like income levels, budgeting skills, affordability of debt as it does to mindset factors like peoples’ willingness or ability to consider their future self, put in place a financial plan or think carefully about what really makes them happy.
It found 38 per cent of people have only a vague idea of where they want to be financially in 10 years’ time, compared to 29 per cent with a specific idea, while 28 per cent have only a vague sense of what gives them joy or purpose, which are identified as key elements of happiness.
The research found 16 per cent of the population frequently compare their finances to the finances of those better off than them with younger people far more likely to do so, and just 17 per cent of people were able to answer at least 4 out of 5 basic financial literacy questions correctly.
The survey found 16 per cent of the population are fortunate to combine healthy finances and a positive money mindset, but 12 per cent struggle with both. The report finds people consistently score lower on money mindset than money matters, regardless of their income.
Common problems identified by the report include 40 per cent of the population having less than £100 left at the end of the month, while 29 per cent of people do not have any emergency savings.
Just 10 per cent of people pay more than the auto-enrolment minimum of 8 per cent of qualifying earnings into their workplace pension, while 49 per cent of people have some form of unsecured debt which averaged £5,700.
While there is a link between low incomes and money worries, 55 per cent of average earners and more than 1 in 3 top earners say they worry about money.
Aegon pensions director Steven Cameron says: “Financial wellbeing is an increasingly ‘hot’ topic, but it’s usually talked about in very narrow terms – money in the bank or levels of debt. Our study shines a light on new areas of financial wellbeing that we hope will resonate with, and provide helpful insight to, a wider range of people – and not just those who earn the most or the least money. It also provides answers to the age-old question of whether money equals happiness and finds that while important, it’s just one half of the story.
“What we’ve found is that for most people, the biggest improvement they could make to financial wellbeing is to reframe the way they think about money. It’s not always possible to make quick changes to your level of income or savings but by thinking about what sort of future you’re working towards, and the steps you’ll need to get there or by making more realistic social comparisons, you can make big strides towards a better relationship with your money.”
Initiative for Financial Wellbeing (IFW) chair Chris Budd says: “It has been said that we measure what we value and we value what we measure. If we measure money by how much of it we have, rather than how we use it, we end up focussing on things that don’t add to our wellbeing.
“Financial wellbeing is all about how we use money to lead a meaningful life. If we measure how our money is contributing to our wellbeing, rather than the amount, we can begin to understand what actions we need to take.
“This work from Aegon on financial wellbeing measurement breaks new ground and I hope it leads to people reassessing their relationship with money and enables them to create financial plans which will make them happier, not just wealthier.”
The post ‘Mental mindset’ key to financial wellbeing – research study appeared first on Corporate Adviser.