How much do you think people earning more than £60,000 spend on their monthly grocery shop? How do you think this would compare with people earning less than £25,000?
In what we believe is a unique set of surveys conducted with our friends at Wagestream, we asked people in both of these groups (those earning more than £60k, and those earning less than £25k) to estimate what they thought the financial circumstances might be of the people in the other group.
What we found surprised us.
We discovered that, in some areas, both the groups were really accurate.
The estimates of our lower income group about the monthly grocery shop of higher earners was very close to reality (£500 versus the actual figure of £450). Similarly, our higher income group were good at estimating the spending of lower earners (£300 versus £210 reality).
But in other areas, both the groups were surprisingly inaccurate.
Our participants, for example, underestimated the average savings of people in the other group group by a factor of three. Higher earners thought that lower income earners would have £1,000 in savings (the real figure was £3,000); whereas lower income earners predicted those in the higher income groups would have £10,000 (vs £25,000).
These figures, and many others explored in the full report, reveal the very different circumstances faced by people in different income brackets across the UK.
But perhaps the most surprising finding was how many people there are in both the high and low income groups who struggle. There are individuals in our high income group, for example, who say that they have no money left at the end of the month; who have no savings; and who worry on a daily basis about their finances. It is just that there are many more of these individuals in the low income group.
To look at these issues in more detail, we ran a second study as a ‘national conversation’ using CogCo's Ekota platform. This allowed people to tell us how they manage their money, and to ‘agree’ or ‘disagree’ with the money-managing techniques used by fellow participants. We then looked at what effect these actions had upon people’s wellbeing.
One of the main findings was that actions that help people build up their longer-term financial resilience were associated with significant improvements in wellbeing. Keeping an emergency fund of six months of expenses is associated with big improvements in wellbeing, for example.
Looking at both these studies in the round sheds new light on the financial wellbeing of the UK population. It shows that across the country earning vastly different salaries can all experience financial wellbeing challenges. But that it is easier for those in the higher income bracket to undertake the kinds of things that will improve their financial wellbeing.
If you want to look in more detail at the responses to our surveys, take a look at the full report, co-authored by Emily Trant at Wagestream, here.
