Managing Your Money - Q1 2023

Managing Your Money

“There’s no easy solution, but expert-led money management courses can help build financial skills.”

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Emma Oyetey, Director of Education & Content, MyBnk

Why should you invest during this cost of living crisis?

One year after the bottom of the Global Financial Crisis, the S&P 500 was up 50%. One year after the bottom of the Covid-19 crash, the S&P 500 was up 57%. These were both relatively quick recoveries from global meltdowns.

The ongoing and prolonged cost of living crisis is more of a marathon than a sprint compared to these examples, but the importance of both staying invested and making further investing contributions can’t be understated.

Investing small can go a long way

Investing is more accessible than ever. On many investing platforms, we can get started investing from £1. Even during the current cost of living crisis, every £1 invested will go a long way to helping you secure your financial future. Every £1 invested today will be worth £19.84 in 30 years (at a 10% nominal rate of return, the S&P 500’s historical average).

Another tool available to help us invest those extra pennies is ‘round ups.’ Becoming increasingly popular, this is where you spend £2.65 on a coffee and 35p is rounded up and invested — once again making investing very accessible. Even with tighter belts, we can get our money invested in the markets.

Don’t stop investing where you can

If you’ve already invested, then the best words of wisdom are to carry on investing. Invest what you can afford each month, and continue to do this throughout the cost of living crisis.

This may sound strange, but the market falling is a good thing for us long-term investors. Let’s say you went to the supermarket and steaks were 50% off. You’d be over the moon and probably buy a few more steaks.

Unfortunately, when the stock market is ‘on sale,’ people often run away rather than run towards it. But just like with steaks, if the market does fall due to the cost of living crisis, use this time to buy more shares/ units of your favourite stocks/funds while their price is lower.

By taking the opportunity, you’ll then hopefully enjoy more long-term gains. Stop waiting, start investing and continue to invest — even during these tough times.

Unfortunately, when the stock market is ‘on sale,’ people often run away rather than run towards it.

Enter the world of investments with ready-made packages

where you are in life.”

She suggests asking yourself questions about how comfortable you are with the idea of losing money in the short-term, and how long are you able to commit your money?

“If you keep your money in a savings account, for example, you will see a return in the form of interest — but if this is lower than inflation, you will be losing money in real terms,” she says. “Investing in the stock market can bring with it the chance of higher

Ready-made packages could help more people take their first tentative steps into the world of investment.

We all like to see our money grow. We also recognise that investing is another way to see a return on our hard-earned cash. However, we may not always be confident in going down that route. With a little support, experts say investments can be accessible and simple and can start with a small amount that builds over time.

Long-term investment and compounding

Money experts point to the importance of saving to build financial resilience, so we are prepared for unexpected bills or changes in circumstance — or if we have a larger goal in mind.

Jackie Leiper, Managing Director of Pensions and Investments at Lloyds Bank,

suggests that for those looking to save money in the medium to long-term, investments can also offer advantages and opportunities alongside their savings.

Investing in the stock market, for example, means investing in an asset such as a company, which itself has the potential to grow. It can offer further benefits in what financial advisors call compounding. “This is when you take any income, such as interest or dividends, and re-invest it on top of the original amount,” she says. “This means you can earn income on the new, larger amount — helping you to reach your investment goals quicker.”

Risk versus reward

Of course, while the rewards can be pleasant surprises, there can be dips in the market, and all investing comes with risks. The key question to address is: how much risk are you comfortable taking to reach your investment goals?

As Leiper explains: “When weighing your different goals, it’s important to understand how much risk you want — and can afford — to take. This will be determined by factors, such as your personality, your investment goals and

reward but with the risk that all investments have: that prices can go down as well as up.”

Invest with the help of experts

It is a case of balancing and weighing these factors as there is a clear connection between risk and reward. To avoid taking on too much risk at once, people may consider investing smaller amounts over the longer term. Not all investments are equally risky. Ready-Made Investments can enable people to invest in a diverse mix of investment types with the help of experts. These are packages of different investments which are looked after for you by a specialist, and it means you don’t have to choose your own stocks and shares.

“To get started, you simply choose which risk level you’re comfortable with — Lower, Medium or Medium-High — and how much you want to invest,” says Leiper.

Get more shares for your money

Lloyds Bank offers Ready-Made Investment services alongside support tools and tips around investing and managing money/financial planning.

Leiper says: “Investing little and often over the long-term can help to smooth out the peaks and troughs of the market. This is because you will be investing each month, regardless of whether the market is low or high. Invest when the market is low, and you get more shares for your money. It means you don’t need to worry about when is the right time to invest as it should average out over time.”

How much risk are you comfortable taking to reach your investment goals?

INTERVIEW WITH Jackie Leiper, Managing Director of Pensions and Investments, Lloyds Bank

WRITTEN BY Mark Nicholls

How fintechs support consumers during the cost of living crisis

Today, eight out of every ten adults in the UK regularly use a fintech tool. Consumers are struggling with the increasing cost of living, and fintech can help through this challenging economic period.

Fintech has transformed the way individuals and businesses interact with financial services — driving efficiency, increasing transparency, reducing cost, expanding access and ultimately creating a more democratic and inclusive sector.

Advancing fintech tools

Many household fintech names were born after the financial crash of 2007–08, as innovators and disruptors stepped in to rebuild trust and resilience in the financial services system. The motivation and drive to put customers at the centre of the proposition have contributed to the success of the fintech sector.

Fintech tools offering support

Fintechs continue to create better solutions during the economic downturn. Solutions range from providing free budgeting opportunities to subscription management tools, credit score improvement options and beyond.

Atom Bank, for example, has started to reach out to customers to provide support options including access to an income and expenditure hub.

Starling Bank has launched an easy-to-use Budget Planner with an overview of what and where people spend that helps to identify where spending could be cut back.

Money management app Moneyhub allows users to see all their finances in one place, track their spending and create budgeting goals.

Through partnership with PayPoint, ClearBank is facilitating a fast and accessible way for over 140,000 unbanked individuals to receive their government payouts. Using their cloud-based API, ClearBank’s real-time settlement technology means people without a bank account can receive cash payments related to 29 different benefit types (e.g. Universal Credit, Disability Living Allowance, Carer’s Allowance) instantly.

Collaborating with employers Karma Technologies works with employers to provide ‘in-kind’ salary advances to their employees through coupons worth up to £300 that can be used at a range of retailers. The service — free of charge to the employees and employers — allows people to make necessary spending ahead of their payday without the need to take out a loan. These are just a few examples of the many fintechs striving to make financial services more accessible and inclusive.

Growth in the UK financial services sector

It is heartening to see the UK continuing to maintain its global leadership in fintech, as outlined by our recently published 2022 Fintech Investment Landscape. The growth and ongoing success of our UK fintech sector mean that more people across the country can benefit from these new and improved solutions and make their money work better for them.

WRITTEN BY Janine Hirt

CEO, Innovate Finance

The motivation and drive to put customers at the centre of the proposition have contributed to the success of the fintech sector.

Why a lack of core numeracy skills is a cost to individuals and society

Many people struggle with number confidence, even though it’s a vital skill to have in our everyday lives. However, there are ways to make numbers engaging and fun while improving confidence.

If you don’t like dealing with numbers — maybe you’re even a bit scared — you might tell yourself that you don’t need to be numerate. You don’t have any use for that skill set in your work or personal life, so it doesn’t matter.

However, you’d be fooling yourself. Basic numeracy can help you budget for your weekly shop, for instance, decipher interest rates (useful if you have a mortgage) or understand your monthly incomings and outgoings. You will encounter numbers — in some form — whatever your job. “Maths and numeracy are everywhere,” says Lucy-Marie Hagues, CEO of credit card provider, Capital One UK. “Having confidence with numbers makes life easier because they are intrinsic to everything we do.”

Basic numeracy is key to managing your money

Sam Sims agrees. As the CEO of charity National Numeracy, he wants to improve how people understand and work with numbers in day-to-day life, to generate better opportunities and brighter futures.

“After all, from the moment we get up in the morning, we’re using maths — even if it’s just working out how long we have to get ready before leaving the house. When it comes to managing your money, numeracy

is an important way to help you feel more in control and make your finances go further.” His message is: however you feel about numbers, you are not alone. We can all improve.

Shifting mindsets towards numbers

Yet, the fact is that there is a mystique around maths because it’s perceived as a ‘hard’ subject. As a result, young women (under 25) and girls (10–18) are disproportionately impacted by a lack of core numeracy skills. “Our research highlights that women are twice as anxious as men when it comes to using numbers and maths,” says Sims. “In addition, 35% of women aged 18–21 consider themselves anxious when making financial decisions, and 24% are not confident when working out numerical problems.”

That has implications for career choices, argues Hagues. “Girls select away from maths-oriented careers” she says. “When I look at pipelines of graduates coming into the full range of finance careers, they don’t tend to include lots of young women. If they’re like me, that’s because maths was an enabler to careers like medicine as opposed to something to be enjoyed for itself.”

Helping young people engage with numbers and numeracy

Capital One UK wants to shake

things up and, as part of its mission to change the world of credit, one small, good thing at a time, is working with National Numeracy to focus on the link between numeracy and social mobility. Over the last year, the company has funded vital research and has been a lead supporter of two National Numeracy campaigns — National Numeracy Day and Number Confidence Week — and hosted a range of internal speaker events, one of which featured National Numeracy ambassador and Countdown co-presenter Rachel Riley. It has also helped National Numeracy develop and launch a corporate volunteering programme, with employees visiting primary schools to help young people become more engaged with numbers and numeracy. “We believe that promoting numeracy is the key to creating financial confidence and a cohort of people to work in the financial industry of the future,” says Hagues. “Gaps in maths confidence start at a young age, so this is a way to tackle the problem at the root.”

Sims says: “We want to reach as many people as possible with our message that everyone can improve their numeracy.” He adds: “Creating this programme together and leveraging the experiences of Capital One UK volunteers has helped significantly expand the impact we have.”

Our research highlights that women are twice as anxious as men when it comes to using numbers and maths.

Sam Sims CEO, National Numeracy WRITTEN

Tony Greenway

Lucy-Marie Hagues CEO, Capital One UK

Building financial futures for young people through a cost of living crisis

Without knowledge of the concepts, products or economic state they are about to enter, how can the young people of today thrive as adults tomorrow and secure stable financial futures?

The Resolution Foundation dubbed 2022 as ‘the year of the squeeze’ with an average household £1,200 worse off than in 2021.

How open banking can open up access to affordable credit

Bank of England figures for December 2022 showed that consumers borrowed £2bn in consumer credit, up £0.5bn from the previous month. As cost of living increases continue to bite, access to affordable credit is more important than ever.

WRITTEN BY Emma Oyetey Director of Education & Content, MyBnk

MyBnk is a charity that delivers expert-led financial education programmes to 5 to 25-year-olds in UK schools and youth organisations — directly, virtually and online. Together with young people, we have created innovative, high-impact and high-energy workshops that bring money to life. We also leverage our impact and expertise to drive systemic change.

Investing in financial futures and wellbeing

The impacts of the cost of living crisis on young people go far beyond money. Young Minds research found that rising costs are the major worry for over half (56%) of young people. They reported disruption to daily life, particularly their diet and sleep. Ultimately, supporting young people to cope with this situation is an investment in their overall welfare, not just their bank balance.

The financial education gap

Despite the increasingly challenging economic situation and its clear impacts on mental health and wellbeing, 39% of young people at school age have not received effective financial education, and 80% of young adults leaving local authority care want more help managing money.

There’s no easy solution, but expert-led money management courses can help build financial skills and confidence at a time when it’s needed most. After our sessions, 72% of primary pupils improved their ability to delay spending gratification, 59% at secondary age planned to make different spending decisions and evictions for at-risk young adults were reduced by 64%.

Access to affordable credit presents a challenge for those who don’t meet the legacy scoring criteria used by traditional banks, loan companies and credit reference agencies when they assess borrowing.

Consumers in need of affordable credit

The list of those excluded is extensive:

• Younger people and those from overseas who haven’t been able to build a credit profile

• Seasonal and gig economy workers without a regular income

• Low-income households

• The self-employed

• Older people who haven’t used credit for a while

With many traditional UK lenders having tightened their affordability criteria, the end result can mean some of these individuals are excluded from borrowing altogether or resort to using costly credit cards or overdrafts to pay for everyday essentials.

Accurate data-driven insights

Open banking data can, however, offer a lifeline. Using this data — with individuals’ consent — as part of the assessment process can provide lenders with additional, up-to-date financial insights that can help increase consumers’ chances to receive approval for loans.

Accurately evaluating what consumers can afford to repay helps reduce the risk of debt default and enables lenders to offer loans that address real pain points. For example, short-term microloans can smooth out income based on past and future earnings.

It also avoids the need for borrowers to provide piles of paperwork, speeds up decision-making and, in some cases, can identify erratic spending.

WRITTEN BY Henk van Hulle CEO, The Open Banking Implementation Entity (OBIE)

Plan your money to secure a financial future

This week is Global Money Week: an annual global awareness-raising campaign on the importance of ensuring that young people are financially aware from an early age. Throughout the week, MyBnk is delivering financial education to 1,600 young people aged 7–25.

This year’s slogan is ‘plan your money, plant your future,’ emphasising the importance of a long-term mindset when it comes to finances. With many of us struggling to afford basic living costs, encouraging young people to plan and save may be more challenging. But giving them the tools to maximise their income, checking any entitlements they are eligible for and reducing costs can help them safeguard their financial futures.

Discounts for sharing data

One specialist lender is even offering customers who decide to share their data a 1% discount on the loan rate, while other organisations offer competitively priced credit to customers who would otherwise be excluded from borrowing completely or denied the best rates and terms.

There are also open banking-enabled loans tailored for employees in specific sectors, such as key workers.

There’s no doubt that open banking can offer opportunities for people who have, to date, been excluded from cost-effective borrowing. As more solutions come to market, we’re looking forward to seeing how open banking technology and propositions can bring further benefits to the financially excluded.

Find out how we can level up your lending or money management insights today.

Ultimately, supporting young people to cope with this situation is an investment in their overall welfare, not just their bank balance.

We’ve built market leading transaction intelligence because we believe every financial decision should be simple.

Know how to use online lending and borrowing for your next investment

The traditional methods of investing and borrowing money have changed in recent years with the arrival of a new type of provider in the marketplace.

Marketplace lending platforms are used to lend money to individuals or businesses through online services that match lenders with borrowers.

Faster transactions

The popularity of this method has increased in the past seven years or so with the emergence of a growing number of online platform providers offering benefits over the more traditional approaches.

For example, it can take half the amount of time for borrowers to secure loans, which with a high street bank transaction can take anywhere between 60 and 90 days before any cash passes hands.

However, most likely, the biggest attraction for investors is the higher rates of return on their investment, upwards of between 7% and 9%* compared to the average 4% traditional investments are currently achieving.

Backed up with property

One of the leading and most experienced marketplace lending platforms around was set up in 2016 by Kuflink. It provides opportunities to invest in loans secured against UK property, unlike many of its competitors.

There are two sides to its business. Investors who can

invest in property loans and borrowers — if they meet eligibility criteria — can receive money subject to 70% loan to value.

The projects available range from 3 to 24 months in duration. These projects are diverse, from someone who may have bought an auction property to refurbish, to larger developers seeking funding for their next development project.

The number of investors in any loan can vary, depending on the size of the project. Kuflink offers two products; investors can choose to invest their funds in either the Select or Auto products.

Understanding the risks

Narinder Khattoare, Chief Executive Officer, says: “We are authorised and regulated by the Financial Conduct Authority (FCA), our borrowers must meet our criteria, and our investors need to fully understand the risks in putting their money into our platform.”

“We underwrite all borrower applications, which also enables our investors to make an informed decision on the investment proposition.”

“We have a long history in the marketplace, and we are a very flexible type of lender,” concludes Khattoare.

INTERVIEW WITH

Narinder Khattoare CEO, Kuflink

WRITTEN BY Sheree Hanna

This year’s slogan is ‘plan your money, plant your future,’ emphasising the importance of a longterm mindset when it comes to finances.

~Emma Oyetey Director of Education & Content, MyBnk

*Don’t invest unless you’re prepared to lose money. This is a high-risk investment. You may not be able to access your money easily and are unlikely to be protected if something goes wrong. † Gross annual interest equivalent rate.Kuflink Ltd (Company Number 08460508) is authorised and regulated by the Financial Conduct Authority since 2017 (Firm Registration Number 724890). Kuflink Ltd has its registered office at 21 West Street, Gravesend, Kent DA11 0BF, United Kingdom.