Six in ten (61%) Brits have become more aware of their finances since the start of the Coronavirus pandemic, rising to 71% among those on furlough, according to new research released today from Experian.
Over a third (35%) of Brits say their financial knowledge has improved during lockdown, with 30% actively researching financial advice or guidance to help them manage their finances through this uncertain time. 18-24-year olds are the most likely age group to have developed their financial literacy (50%).
Those who have conducted research are twice as likely to have contacted at least one lender or provider to discuss a payment holiday (34% compared to the national average of 15%). Nearly half of consumers also reported having peace of mind regarding their current financial situation (46%).
James Jones, Head of Consumer Affairs at Experian, said:
“The Coronavirus pandemic has caused financial difficulties for many. People are looking hard at how best to prepare for the potential economic challenges ahead.”
Knowledge gaps may lead to financial penalties
Although the research showed good intentions from a majority of the population, it also highlighted a number of crucial gaps in people’s knowledge:
- 35% of Brits wrongly believe that taking a payment holiday as a result of the pandemic could impact their credit score.
- Nearly half (46%) are not sure or don’t think that interest will continue to be charged if a payment holiday is taken – something that would in fact happen for the duration of the payment holiday.
- Almost one in five (18%) Brits have already cancelled a direct debit during the pandemic before speaking to a lender, which can lead to penalties on their credit score.
Jones added, “It is essential that people discuss their circumstances with their lenders if they are struggling, certainly before cancelling direct debits. Unauthorised missed payments can lead to penalties and impact your chances of getting credit in the future. Where payment holidays are agreed, interest will still be charged meaning subsequent payments are likely to increase. Therefore, it’s advisable that where people can continue to make payments, they should continue to do so.”
Better financial education will have long-term benefits
Despite the challenges faced by many, the study revealed that 35% of respondents have managed to save more money in recent months than before the pandemic, rising to 40% for people who have improved their financial knowledge during the pandemic.
Jones added: “For the majority of people the first priority at this time is safeguarding the health of themselves and their families. Second is making sure they are financially ready for the economic challenges ahead. Using this period to plan for the coming months and, if you can, to set aside some savings is a very sensible move. It will help you manage any further economic turbulence over the rest of the year and beyond.”
Experian’s online Coronavirus Hub offers guidance on a number of these issues, including advice on payment holidays, how people can manage their finances during the pandemic, and a guide showing what forbearance (support for customers struggling to make expected payments) different lenders are offering.