Bank of England Rate Rise: Will it Help Save More or Cost You?

In November 2017, the Bank of England announced that it was raising its base interest rate for the first time in a decade, from the record low 0.25% to 0.5%.
Will it help you save more?

When it comes to savings, you’re not going to see a massive influx of extra savings interest, but anything extra always helps. With most ISA interest rates hovering around the 2% mark, we’ll probably see an extra 0.25% return – another £2.50 per £1,000 each year, or £22.50 instead of £20.

How Will It Cost You Money?

This depends on the type of credit you already have and whether you have a fixed or variable return rate.
Most common, smaller types of debt – such as credit cards, store cards, and unsecured personal loans – have fixed terms for repayments set out when you sign up, which won’t be affected by the new base rate. If there are going to be interest rate changes, the company will contact you directly to make you aware of what these changes are and when they will take effect.

How Will Your Mortgage Be Affected?

With a mortgage being possibly the biggest monthly outgoing, this is the biggest concern for most people. How your mortgage repayments are affected depends on the type of mortgage you took out:

Fixed rates

This offers a set sum to be paid every month for a determined period (one, two, three, five, or ten years). These often have the most expensive rates and fees since they offer stability and reliability: However much the Bank of England’s base rate varies, you will never pay more (or less) than agreed.

Your fixed rate mortgage should not be affected by the base rate change. However, once the period has expired, you will be subject to the lender’s SVR (Standard Variable Rate), which is affected by the base rate, unless you take up a new mortgage deal.

Standard variable rates

These are interest rates set by the lender and are subject to change at any time. They loosely follow the Bank of England’s base rate but don’t reflect them exactly: For example, with the base rate increase of 0.25%, your lender could increase standard variable rates by 0.5%.

Tracker rates

These are directly correlated with a base rate, “tracking” at a certain level above. This is usually, but not necessarily, the Bank of England base rate.

For example, if you rate is tracked as 2% above the Bank of England base rate, it has just risen from 2.25% to 2.5%. However, some lenders use other base rates, like the LIBOR interest rate, which is higher than the Bank of England rate, due to the higher risk. Like fixed rates, tracker rates are normally only in place for a few years, and then your mortgage will revert to the (typically higher) standard variable rates.

Capped Rates

These can be either fixed, standard variable, or tracker, and react accordingly (or not) with the base rate, but they come with a guarantee that they will never exceed a certain amount. As long as this cap is not being exceeded by the 0.5% increase, then your rates will still fluctuate (or not, depending on if your rate is fixed or variable) with the base rate.

Time to start saving and reduce debts?

With savings rates back up and interest rates on the increase, and more rises expected in the future, 2018 could be the year to start saving and clear away debt before the base rate gets any higher. And if you want to get rid of all your debts, you could consolidate them and reduce your monthly payments, whilst paying into a savings account at the same time. Already debt free but want to take advantage of a savings account? Put a little aside each month straight from your salary payments and take control of your savings.

The Bank of England Interest Rate Rise: What this Means For Your Staff?

The Bank of England announced that it was raising its base interest rate for the first time in a decade, from the record low 0.25% in August 2016 to November 2017’s 0.5%. How will the rising base rate affect your staff?

Higher Mortgage Payments

Approximately half of mortgage-paying homeowners are going to have a little less disposable income each month.

Out of 8.1 million mortgaged households, the BBC identifies 3.7 million (46%) as having a tracker or standard variable rates, both of which are influenced by the Bank of England’s hike in the base rate.

Although SRV’s may follow base rate trends (increasing a little as the base rate increases and vice versa), they do not follow it exactly. Tracker rates, however, directly correlate with the Bank of England’s rate, and so those with a tracker rate mortgage can expect a 0.25% increase in their payments.

According to UK Finance, the average outstanding balance on a UK mortgage is £89,000, meaning a tracker-based increase of about £12 a month. However, many homeowners are preparing to lock-in fixed rates, with predictions of another two increases coming over the next three years, bringing the base rate up to 1%.

More Savings … Right?

It makes sense that a higher Bank of England base rate would automatically equate to a greater return on savings accounts and ISAs. Well, not necessarily. Newcastle building society has said it will pass on the 0.25% increase in full to all its savers, whereas for Nationwide users, the “majority” will benefit from “improvements.”

Even if a bank does offer the increased rate, the extra 0.25% on £1,000 (the minimum amount recommended as emergency savings) is £2.50, which is a small incentive for holding money for a year.

Spending, Not Saving

The low-interest rates of the previous years have encouraged debt and inhibited saving. Most people have felt that, what was the point in putting money away for a couple of pounds when it could be being spent in the here and now?

And with bank interest rates low for loans, it seemed there was a glut of spending beyond our means. But now with the higher base rate (and its potential to continue climbing), it’s time to be a little more savvy with our personal finances before they become out of control.

A Different Way to Save

Money worries have a direct impact on productivity, mental health, absence and even a decision to go elsewhere. Employees work for money: to pay their mortgages (with the newly inflated prices) or rent, pay off debt, save, enjoy themselves and treat their families.

Employees stressed out by not having a “financial cushion” to fall back on can become anxious and less productive with their minds on other matters, whether that’s paying off existing debt or saving for emergencies or special occasions. Our Credit Union savings account is a useful tool for employees to put aside as much or as little as they like every month – and at no cost to your business.

Helping employees on the property ladder: What can you do?

We see headlines about “the housing crisis” almost every few weeks. On the news, online and in newspapers, we are living through one of the worst housing shortages in generations.

This crisis comes down to an overlapping range of complex factors. In the UK, we don’t have enough housing stock to meet current demands. House prices are also more expensive than they’ve ever been, compared to income, with average prices seven times incomes, making saving for a deposit difficult, if not impossible for many young people.

At the same time, millions of people have become “accidental landlords” supporting “generation rent.” In some cities, such as London, they end up renting out a large house to multiple tenants as a result of high property and rental prices.

Beyond Generation Rent

For numerous reasons, people can end up owning more than one property, which by 2021 is where 21% of families (over 5 million households) are going to live. Private rented accommodation, often when the landlord relies on the rent to cover a second mortgage or ensure they can afford the mortgage on their primary residence, is fast becoming the norm for millions of individuals, couples and families.

Estate agency, Knight Frank commissioned a YouGov survey of 10,000 tenants which also involved speaking to 26 investors and property companies. It found that far more people over 50 are renting than most imagine, with “40% of renters pay more than 50% of their incomes on rent, the report found.”

The report also projects that those reliant on social housing will increase to 4.3 million by 2025 unless more action is taken to resolve the housing crisis. Social housing is also under strain, with Shelter, the housing and homeless charity, reporting that 50,000 households are homeless, often moving between temporary and emergency housing whilst waiting for social accommodation.

With Brexit on the horizon, the second largest investor in UK social housing, the European Investment Bank (EIB), has stopped putting £1 billion annually into social housing, either until talks progress, or permanently. Nobody knows, and until recently, the government has been slow to come up with an alternative solution.

What can be done about housing?

This persistent housing crisis is one of the biggest barriers to social progress in decades.

When past governments helped people onto the property ladder, it spurred forward consumer spending, saving and job creation. Now we don’t have enough properties, forcing people to spend more they can afford on rent, making it increasingly difficult to save for a deposit to get on a property ladder that seems out of reach for many.

The government is taking some action. Help to Buy, which offers affordable equity loans for new homeowners (worth up to 20% of a property’s value), is being given another £10bn government funding extension. In the recent budget (November 2017), the government announced the new housing scheme, aiming for 300,000 homes within 7 years, whilst also abolishing Stamp Duty for properties up to £300,000 in England, Wales and Northern Ireland.

Prime Minister Theresa May, also recently announced a £2bn which should pay for 25,000 more social properties.

Employers can also help solve this problem. It doesn’t take radical action or giving staff huge bonuses. In fact, it won’t cost anything; but it will make your team feel more valued, more likely to stay with your company and less stressed about money knowing they are putting funds aside that will help them buy a house.

With FairQuid financial wellbeing solutions, staff can save money more easily, with savings payments coming directly from the source, going into a savings account they can use for a deposit – or put into a government-backed ISA that can work alongside a Help to Buy equity loan.

As an employer, you can do something about these issues (whilst also ensuring your staff are more productive and engaged) – thanks to FairQuid Credit Union savings accounts. Best of all, these won’t cost your business a penny. Find out more today.

Putting Nobel Prize Winning Nudge Theory in Action With FairQuid

Richard Thaler won the Nobel prize for economics in 2017 for his contributions to behavioural economics. His ideas, known as “nudge theory” could play an important role in encouraging staff to reduce debts and save more, which improves retention and reduces recruitment and training costs.

Nudge theories have already been put into practice across many countries.

In the UK, Thaler’s belief that when policies are skewed towards people’s long-term self-interest, have already positively impacted pensions, reduced smoking and increased organ donation.

Championing the concept of “nudging” people was behind the government’s 2012 pensions auto-enrolment policy that meant private businesses and employees needed to opt-out rather than opt-in. It has successfully and massively increased private pension contributions.

Nudge Theory in Action

In 2010, the behavioural science and economics professor at the University of Chicago was part of the coalition government “nudge team”, which explored everything from vaping to energy and organ donations. Known as the Behavioural Insights Team, it’s credited with encouraging 100,000 extra organ donations and persuading 20% more people to shop around for a cheaper energy provider.

The theory achieved widespread attention when Thaler co-wrote a book with US professor Cass Sunstein in 2008: Nudge: Improving Decisions about Health, Wealth, and Happiness. Since then, nudge concepts have been put into practice around the world in the public, private and charities sector, many times with resounding success.

Not that they are without critics. Some on the right say they’re too paternalistic, even when they achieve results that help those directly involved and the public. Whereas, some on the left claim these concepts are neoliberal – concepts popular during the Bush administration – since they rely on individual choice instead of overt state action.

Although popular with academics and governments, we need to see how these theories could be applied in the workplace. Could nudge theories help employers retain more staff, reducing talent acquisition and training costs?

In our view and with the experience we have had with employers, we know they can. FairQuid is putting nudge theory into practice.

Staff and Employer Benefits

Far too much data exists to show that people in the UK are in more debt than ever and are saving far less than we should. We are, unwittingly, leading ourselves down the same road that led to the last global recession.

Too much debt and not enough savings directly impacts employees. Staff are stressed about money. This won’t affect all of your team all of the time, of course, but once a percentage of your staff are worried about money often enough it will impact productivity, absence rates, stress levels and illnesses. Especially this time of year, in autumn and winter, when the need for money is greater (Summer is gone, and Christmas is approaching) and colder weather makes people more likely to get colds and flus.

What happens when existing credit limits prevent staff from spending much more, yet they need more for presents and other seasonal costs?
One of two things: People try and borrow more, which could mean payday loans, or they look for a new, better paying job. Either way, you lose a member of staff, or stress and absence rates increase as a result of larger debt burdens.

There is another way. With FairQuid, we offer consolidation loans that include a savings account and savings products. Financial wellbeing for staff, which costs your business nothing. Below is a table outlining what happens when someone takes out a consolidation loan that automatically includes a savings account.

(1.) Christmas is approaching. A customer spends too much, pushing them further into debt since they haven’t had time to pay down debts since the Summer.

(2.) They are offered FairQuid Financial Wellbeing products at work, taking out a consolidation loan that gives them a little extra credit whilst paying off existing debts and opening an automatic savings accounts. Funds are taken directly from source, so they get used to budgeting a new amount whilst reducing their debts and starting to save.

(3.) In time, debts are fully paid off, and savings continue, which is what 90% of FairQuid Financial Wellbeing customers do after they clear their debts.

That is, one of the ways, how we can help you put Nobel prize-winning ideas into action, which means employees don’t look for a new job and are less stressed and more present at work.

As an employer, you can do something about these issues (whilst also ensuring your staff are more productive and engaged) – thanks to FairQuid Credit Union savings accounts. Best of all, these won’t cost your business a penny. Find out more today.

Are you saving money for Christmas: Is there an easier way?

Let’s face it, saving money for Christmas is not easy.

And if you don’t just have the cash in the bank – who does, right? – most people need to borrow extra in the run-up to Christmas, then spend the first few months of next year paying it off. For some people – up to 11 million according to research in The Independent – Christmas 2017 could still be costing them interest charges one year later.

Between food, drink, parties, stocking filler, presents and last minute dashes to the shops, research estimates that Christmas could cost “anywhere between £750 and more than £1,500 per adult.”

No matter what you earn, that is a lot of money going on a few days worth of fun. Hence the popularity of savings clubs, where you can put money aside over the year, then spend those vouchers on food, drink and presents. Not that you won’t incur some extra expenses as the big day approaches, but at least you’ve spread the cost.

Is there another way to save for Christmas?

Some people would say setting money aside throughout the year is the most sensible option.

The problem is, we are not a nation of savers. We spend. We take out credit. We don’t pay it off; instead, it accumulates and costs us even more over the year. Statistics don’t lie, not when it comes to our national savings habits. In fact, you might be surprised to learn that 70% of adults in the UK have little to no savings.

Debt charity, StepChange, recommend having at least £1000 set aside in savings – which might just about cover the cost of Christmas. In reality, families earning less than £1,500 per month (after tax) often have less than £100 in savings, making between £750 and more than £1,500 for Christmas a huge expense.

Thankfully, there is another way – one that doesn’t involve taking money out of your account and putting it into savings after being paid. It is something your employer can help with: Employee benefits savings accounts.

Here at FairQuid, we work with Credit Unions and employers to provide savings accounts for staff. All you need to do is ask for this as an employee benefit. Once your company is signed up, you apply for a savings account. And then, every month, money goes straight from your salary – like childcare, pensions or travel to work schemes – into this savings account.

What about when you need to withdraw money?

It works exactly like any other savings account. You control it.

Our Credit Union partners will give online, phone and branch access, and most come with debit cards too so that you can withdraw funds anywhere. You can also increase or decrease the amount that goes into the savings account; just ask HR or your manager before payroll cutoff. It’s as easy as that. No need to worry whether you’ve set aside money for Christmas – it happens automatically, every month.

Start saving with a FairQuid Employee Benefit Savings Account. Find out more.

Why Employers Should Be Worried About The UK’s Debt Time Bomb

In 2010, the outgoing Chief Secretary to the Treasury left his successor a note. It famously read:

“I’m afraid there is no money.”

At the time, he wasn’t joking. UK government borrowing was at record highs.

Since then, coalition and contrastive governments have committed to cutting the deficit. A robust, many would now say, an overly stringent set of fiscal policies have reduced the deficit from a record £154 billion in 2009 (around 10% of GDP) to £52bn in March 2017 (2.6% of GDP).

Unfortunately, at the same time, consumer debt has increased since 2012.

Consumer Debt Time Bomb

In the past five years, consumer debt – which includes mortgages, loans, credit cards, store cards, car finance and student loans – has grown 7.3%, adjusted for inflation. During that same period, wages have only increased 0.7%, which means more people than ever before are turning to credit to treat themselves, go on holidays, even pay household bills.

One reason for a larger debt burden is rising house prices, which means a considerable amount of this debt, around £1.3 trillion is tied to property which is increasing in value. However, £201.5 billion of the UK’s total debt – £1.63 trillion – is unsecured, through credit, store cards, loans and overdrafts, with the latest figures for July 2017.

The number of customers in arrears, an indicator of financial distress and an inability to afford credit, has also increased. Over the last five years, council tax, water and electricity bill arrears has increased around 12% to a combined total of £5.3 billion. There aren’t accurate figures for arrears in other areas, including rent and phone bills, but the rise in CCJs and bailiff action are strong indicators that families are struggling to cope with too much consumer debt.

If this is all sounding scarily familiar, as if we’ve lived through this nightmare before, you wouldn’t be wrong. In many respects, the UK economy is approaching potentially worrying economic waters. Experts note that “the ratio of household debt to GDP heading back towards the peak seen in the boom years before the financial crash.”

The outgoing German Finance Minister Wolfgang Schäuble has warned that “risks arising from the accumulation of more and more liquidity and the growth of public and private debt” could cause a new financial crisis. Germany, unlike other Eurozone countries, is running a trade and government surplus, currently sitting at £16.8bn for the first half of 2017.

Why Employers Should Be Concerned

Work directly impacts home life, and what happens at home never always stays at home.

As much as employees and employers try, when one area of our life is out of balance – such as our personal finances – it impacts everything else. Debt causes stress. Stress causes staff to take time off. A cold or flu isn’t always caused by a virus: stress colds are similar, in many ways, but anxiety is the main cause, with a lack of money, savings or too much debt one of the reasons employees need to take time off because of stress.

Not only do people take time off, but employees can be present whilst being mentally checked out. Coming into work so focused on something else that they aren’t productive is nearly as bad as an employee taking time off as a result of stress. In either case, your team and potential customers are affected.

Another risk is that they look elsewhere for work. When debts mount, one of the seemingly easiest ways to reduce them is to try and earn more. If your company isn’t raising salaries, then they could start looking for a new job to gain the pay rise they need to get debts under control.

Is There A Solution?

Thankfully, there is a solution, and it won’t cost you a penny.

Not every employer can raise salaries quickly, or give out loans, or directly step in when staff are struggling. Nor is it your role as an employer to do that. Not every practical financial workplace benefit needs to come from your HR budget.

Providing practical support, such as employee benefit credit union accounts, is far cheaper – free for businesses, in the case of FairQuid – than watching staff struggle, lowering productivity and even jumping ship.

As an employer, you can do something about these issues (whilst also ensuring your staff are more productive and engaged) – thanks to FairQuid Credit Union savings accounts. Best of all, these won’t cost your business a penny. Find out more today.

Save Money An Easier Way With Employee Benefit Savings

Saving money is not easy.

It isn’t easy during Summer, whether or not you have kids – there’s always something to spend it on. And then Winter is just as bad.

Come Spring, most people are either rebuilding what savings they had or paying down extra credit card debt after the Holidays.

Not to mention all the other expenses most people encounter throughout the year, no matter how well you budget. There is always something to spend money on. If you don’t have savings, then this is often something you know you should have, but actually saving money is a different matter entirely.

Don’t worry if you find saving money difficult. You aren’t alone. In fact, you might be surprised to learn that 70% of adults in the UK have little to no savings. For most families, even those with two paycheques and working tax credits or another government benefit for employees, getting to that £1000 in savings can be a struggle.

Debt charity, StepChange, recommend most people have at least £1000 set aside in savings. But in reality, families earning less than £1,500 per month (after tax) often have less than £100 for emergencies. Even those earning more put spending on credit cards, juggle zero percent interest offers, take out store cards and loans instead of saving than spending. We aren’t a nation of savers anymore.

Why doesn’t anyone save money?

Easy, or relatively easy – depending on credit scores – access to credit is one reason. The higher cost of living and lower real wage increases are another. Inflation is rising faster than wages, and Brexit, unfortunately, has made some imports more expensive as the value of the Pound has fallen compared to world currencies.

At the same time, the other reason most people don’t save is pretty ordinary. For most of us, when the money hits our accounts, a lot of it goes back out on bills. Then you have real or imagined pots of cash for different things that don’t all go out at once, such as food, petrol or bus fare, clothes, and some cash for treats. Everything is allocated. There usually isn’t that much set aside for savings, and if there is, chances are it gets spent on something else. You get paid again, and the cycle repeats itself for another month.

Is there a way to start saving?

Yes, yes there is. It doesn’t take a lot of effort, and it’s something your employer could help with: Employee benefits savings accounts.

We work with Credit Unions and employers to provide savings accounts for staff. All you need to do is ask for this as an employee benefit. Once your company is signed up to FairQuid, you apply for a savings account, it gets set up, and every month money goes straight from your salary – like some childcare, pensions or travel to work schemes – into this savings account. Instead of trying to take money out after getting paid, the savings automatically increase and people soon get used to budgeting a different amount every month.

What if you want to withdraw money?

It works exactly like any other savings account. You control it. Our Credit Union partners will give online, phone and branch access, and many may come with debit cards so that you can withdraw funds anywhere. You can also increase or decrease the amount that goes into the savings account; just ask HR or your manager before payroll cutoff. It’s as easy as that. No need to worry whether you’ve set aside money for savings – it happens automatically, every month.

Another benefit are the dividends. Interest charged to those who borrow from credit unions is paid back to everyone who is a member – which includes everyone with a savings account. Once the profit is calculated, that is paid out as dividends to savers.

Start saving today, with a FairQuid Employee Benefit Savings Account. Find out more.

Why Savings Through Payroll Deductions Benefits Employers and Employees

Wages are not rising as fast as living expenses. Growth is slow, and companies are, understandably, hesitant to increase payroll costs. At the same time, employees – consumers – are borrowing more than ever and savings are at a record low.

This isn’t some scene setting exercise for an article in The Economist. Unfortunately, this is the economic reality of Brexit Britain.

Retailers need consumers to keep spending, So do service companies and house builders. Banks are keen they keep spending too, but all of this means it’s easier to borrow money than save.

At the same time, the cost of living – inflation – keeps increasing, up 2.7% in May 2017 – from 2.6% in April, according to The Consumer Prices Index (CPIH), which can’t keep pace with salary increases. Again, forcing consumers to borrow or dip into savings when costs increase or they need to spend more.

With the Summer behind us and Christmas on the horizon, most parents will be feeling an acute pain in the wallet or when the next credit card statement hits.

Savings Recommendations vs Reality

Debt charity, StepChange, recommend most people have at least £1000 set aside in savings. For one in four families in the UK, those that earn less than £1,500 per month (after tax), that simply isn’t realistic or practical. In reality, savings amongst low earners is usually around £95 – an amount that can be easily wiped out when an unexpected bill hits or one month is more expensive than another, such as during the Summer or Christmas. Even that £1000 figure is too high for 70% of adults in the UK.

Saving money is not easy for employees who live paycheque to paycheque.

For most families, even those with two paycheques and working tax credits or another government benefit, getting to that £1000 in savings can be a struggle. Once money comes in, it’s usually allocated to something – mortgage/rent, bills, food shops, kids, everyday money and the occasional treat. Savings is a nice to have, but when credit is cheap and easy to access, not a must-have, at least not every month.

An alternative: A benefit employers can offer employees?

Companies can offer staff an alternative solution.

An employee benefit Savings account, with the amount an employee wants to save automatically deducted from salary payments. Instead of staff struggling to find money to put aside after they’ve been paid, with automatic deductions before the funds hit their bank accounts, they can adjust personal budgets whilst knowing a savings pot exists they can tap into when needed, making it far easier to start saving.

Every month, your team could have money going into savings accounts, putting aside a little extra that grows with dividends, from our Credit Union partners. At the same time, if any of your team need to borrow from a credit union, the interest they pay goes back into the pot that pays out dividends to themselves and everyone else with a savings account.

Similar to automatic enrolment, except this is a voluntary scheme and one that employers don’t need to make contributions towards. Staff control their savings, including withdrawals anytime they need.

Not only will employees gradually build up savings, but for employers, you can rest easy knowing:

  • Workplace stress levels would reduce. Money is one of the main reasons behind absenteeism, stress-related illnesses, poor engagement at work and staff looking for new jobs.
  • Mental health at work will improve. Knowing that staff have savings, money in the bank will reduce the impact of stress, making your team more engaged, focused and able to hit targets.
  • As a workplace benefit, savings accounts are one of the most effective, practical, financial benefits you can offer that doesn’t cost the company money. Now is the perfect time to introduce workplace savings accounts as an employee benefit.

As an employer, you can do something about these issues (whilst also ensuring your staff are more productive and engaged) – thanks to FairQuid Credit Union savings accounts. Best of all, these won’t cost your business a penny. Find out more today.

How to Get Financially Fit and Stop Living Paycheque to Paycheque

Average weekly pay is increasing, but at the same time, so are living expenses. One of those figures, according to recent Office for National Statistics (ONS) data, is not increasing as fast as the other.

Can you guess which is rising faster: Inflation – the cost of living – or what most people are paid?

If you guessed inflation, you would be correct, according to April 2017 ONS figures.

Average regular pay (not including bonuses, etc.) – before tax and other deductions – is £472 per week, up from £464, in April 2016. However, the cost of living – inflation – keeps increasing, up 2.7% in May 2017 – from 2.6% in April, according to The Consumer Prices Index (CPIH).

Most of us are being paid slightly more – unless you have a ‘gig economy’ job – but that money isn’t stretching as far, with goods, services, food and electricity prices going up again.

At the same time, more of us are struggling with debts with fewer savings to fall back on.

The Bank of England is increasingly concerned with the surge in personal borrowing – up 10% in just over a year. No one wants to return to pre-Credit Crunch conditions (2007-08), and banks lenders are keen to prevent this – with a 24% increase in CCJs in 2016, compared to 2015 figures.

Consumers that struggle with debt, either due to an unexpected bill, changing financial circumstances or unemployment, could enter the collections process sooner than expected. With the average CCJ amount as low as £1,495 per person, this is a worrying sign that the majority of people are only a few missed payments from default and long-term credit score damage.

But that isn’t the only worrying sign.

One in four UK families are classed as low-income, according to Aviva UK, with monthly income below £1,500. High earners are those with an average monthly income above £5,000 (the top 8%). Part of this emerging crisis is that savings amongst low earners is now £95 (in February 2017), compared to £136 in the same period the previous year.

Numerous financial experts and the debt charity, StepChange, recommend a minimum savings amount of £1000 – which is simply unrealistic for most low-income families or those currently servicing a sizeable amount of debt, in relation to income.

A Real, Practical Way Forward?

Banks, credit cards, payday lenders and consumer finance partners aren’t the only ones that can lend money in the UK. Not-for-profit, Credit Unions can make responsible lending decisions, even when people have previous blots on their credit file, but a decent recent financial health; e.g. at least one year’s employment with the same employer.

FairQuid partner Credit Union loans are more affordable. Loan payments come directly from your salary, which means they take the affordability of this into consideration too. Loans through credit unions also automatically include a savings account, which means, over time, your financial health keeps getting better. Ever heard of a Personal Loan that also builds your saving account?

Don’t let your debt get the better of you: Time to get financially fit, with FairQuid: Your Money, Your Way. Find out more and apply here.

Debt and Economy Damaging Careers and Earnings of Millennials

Our economy is growing, but that doesn’t mean we have seen the last of the recession. It continues to exert an influence on the prospects and earnings of professionals who started their careers during the recession.

Millennials – those born between 1984 and 2001 (also known as Generation Y) – in the UK ended up with the short end of the financial straw. Around the same time – the early 2000’s – the economy was ballooning into a bubble; Generation Y was being sold the dream of earning a degree and walking into a high-flying graduate job, with signing bonuses, cars, and benefits. Then, in 2008, the recession hit.

Dream jobs for graduates became scarce. Young people, used to their own freedom, were forced to return home. A bleak reality sunk in, with dreams put on hold and a younger generation taking any job they could get, from zero hour retail contracts to low-paying freelance gigs. No one expects to graduate from three years of study with a first or 2:1 only to return home and work at Burger King, but for some, especially those who aren’t from privileged families, that is what happened.

Although the recession is over, it takes millennials even longer to get on the housing ladder. Savings are frighteningly low amongst this generation. And debt is high, thanks to student loans, overdrafts and credit cards. But the recession has had a more subtle, yet ultimately more damaging impact on the career prospects of millennials.

Lower Career Confidence

Millennials are – incorrectly – considered fickle and loyal only to themselves. Partly thanks to social media, the “oversharing” generation appear quick to change partners, university courses and jobs. However, a recent study by the Resolution Foundation has found that workers born in the mid-1980s are half as likely to switch jobs as those born in the previous decade. Only 25 percent of millennial professionals regularly job hop, in stark contrast to one of the career stereotypes of that generation.

Wages are also stagnant for younger generations, making it harder to pay off debts or save for a deposit. Perhaps unsurprisingly, many who weren’t able to find work after graduating went self-employed, which comes with other risks and rewards.

For those in employment, “One of the most striking shifts in the labour market has been young people prioritising job security and opting to stick with their employer rather than move jobs,” said Laura Gardiner, a senior policy analyst at the Resolution Foundation.

Can Employers Support Millennials More?

Through no fault of their own, Gen Y employees entered the labour market at the worst possible moment. For many, this slowed down, derailed or resulted in entirely new career plans and pathways. It also made this generation of professionals more cautious. Consequently, they don’t take as many risks, which is why they place a higher value in job security, skills development and reassurance, in the form of praise and feedback, more than previous generations.

However, with unemployment lower than ever – at 4.8% – we know this situation is already starting to change. Younger workers are eager to get on the property ladder. Perks and benefits are great, but millennials prefer salary increases, bonuses, commission or another form of financial reward. Employers should not depend on loyalty when they are only handing out “soft” incentives, such as training, flexitime and Friday treats, like pizza and cake.

One of the biggest financial challenges for younger workers is debts and savings. Too much of one, not enough of the other. Pizza and cake will not keep staff loyal forever when they need to clear debts and pay deposits. However, you don’t always need to give millennials a raise to solve these issues.

Instead, we can provide long-term debt consolidation and savings accounts from ethical lenders through our platform, making it easy for you to help them repay debt responsibly and save for a brighter future, without costing employers anything. Now that is an employee benefit your staff can take to the bank. Find out more today.

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