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Linking mindset and financial wellbeing

5 April 2021

A new report by Aegon has unveiled the significant link between mindset and financial wellbeing.

The Financial Wellbeing Index discovered 16% of the population, the equivalent of 8.6 million people, combine healthy finances and a positive money mindset, while 12%, nearly 6.5 million people, struggle with both. In total, more than 19 million people in the UK are struggling with their financial wellbeing.

The analysis, which was based on factors including income levels, budgeting skills, affordability of debt, as well as people’s willingness or ability to consider their future self and put in place a financial plan, found that people consistently score lower on money mindset than money matters, regardless of their income. More than half (55%) of average earners and more than 1 in 3 top earners say they worry about money.

Aegon said its study, which surveyed 10,000 people and covered more than 1.3 million data points, found nearly two fifths (38%) of people have only a vague idea of where they want to be financially in 10 years’ time, compared to 29% who have a specific idea, while 28% of respondents only have a vague sense of what gives them joy or purpose. One in six (15%) also admitted to frequently comparing their finances to the finances of those better off than them.

The findings also showed that 87% of the population do not have a long-term financial plan, with 40% of people having less than £100 left at the end of the month and nearly one in three (29%) without any emergency savings.

Steven Cameron, pensions director, Aegon, said: “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 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.”

Cameron said the biggest improvement people could make to their financial wellbeing was to reframe the way they think about money.

Cameron added: “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.”

Chris Budd, chair of the Initiative for Financial Wellbeing, commented: “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.”

Professional Paraplanner