"This research shows that financial wellbeing cannot be understood through income alone."
- Tina Hughes - Yorkshire Building Society
Millions of UK households could be exposed to future financial shocks, despite seeming financially secure, new research by Yorkshire Building Society has found.
The Building Financial Foundations Barometer report, published in collaboration with the University of Bradford in light of UK Savings Week, draws on data from 10,000 UK adults and advanced predictive modelling, aiming to provide a framework for understanding financial vulnerability and resilience.
The report found that although many households appear financially secure today, the average UK Financial Wellbeing Score (FWS) is 680 out of 1,000, placing the typical household in the amber category. This is defined as broadly stable, but vulnerable to disruption from rising costs, debt or unexpected life events.
Around a third of households fall into each of the report’s red, amber and green categories.
According to the report, a savings buffer equivalent to three months of essential expenses or a modest monthly surplus were associated with significant improvements in financial wellbeing. In contrast, wellbeing declined sharply when housing costs exceeded 40% of household income or unsecured debt rose above £5,000.
The findings showed that financial wellbeing is shaped not only by income, but also by whether households have the financial flexibility to withstand unexpected shocks such as job loss, illness or relationship breakdown.
A lack of financial buffers was identified as the most common weakness across age groups, income bands and regions.
Yorkshire Building Society says that higher-income households are not immune, with the analysis finding that even those with good financial security can be vulnerable if they lack savings or experience significant life events.
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"This research shows that financial wellbeing cannot be understood through income alone," Tina Hughes, director of savings at Yorkshire Building Society, said. "People across different income groups can be vulnerable to a sudden change in circumstances, particularly if they have little room in their household budget or no financial buffer to fall back on.
"We recognise that continued pressure on living costs means saving is difficult, and for some people may not currently be possible. This framework is not about judging individual circumstances or suggesting there is a simple solution.
"Where people are able to put something aside, the findings show that even a modest buffer can make a difference over time. UK Savings Week provides an opportunity to raise awareness of that, while encouraging a wider conversation about the support people need to build greater financial security."
Dr Kamran Mahroof, who led the research from the University of Bradford, added: "The data shows us clear thresholds - each extra month of savings runway delivers a step-change in resilience. The data shows that financial resilience isn’t just about income; it’s about having buffers to absorb life’s shocks."
