Understanding Financial Vulnerability

In the UK, 53% of us will be 'financially vulnerable' at some point during our lifetimes, according to the Financial Conduct Authority - but what exactly does that mean, and what should you do to protect yourself and your loved ones from increased vulnerability?

Understanding financial vulnerability and building resilience

With talk of recession in the news, and a shifting political climate at home and internationally, it's more important than ever to be able to recognise and respond to the warning signs of financial vulnerability.

Nicola Crosbie, Chartered Financial Planner of the Year, explains exactly what it means to be financially vulnerable and what you can do to reduce the impact of increased vulnerability for you, your loved ones, and your family’s financial future.

Watch Nicola's workshop here:

The importance of financial education

Financial education plays a vital role in empowering individuals to make informed decisions about their money. There are no silly questions when it comes to finances - you simply don't know the answer until you ask! Creating safe spaces to discuss money matters openly and honestly, particularly for women, is essential for building financial confidence.

Financial services has evolved over the years, transforming from what was once viewed as merely an industry into what many now consider a profession. While professional qualifications and expertise are important for establishing trust, what's equally valuable is approaching financial relationships as educational partnerships rather than one-sided consultations.

What is financial vulnerability?

Financial vulnerability can manifest in many ways. It doesn't have to be a major crisis to significantly impact your quality of life. Even seemingly minor financial challenges can leave you feeling vulnerable and insecure.

These vulnerabilities might include:

Difficulty managing day-to-day expenses

Lack of emergency savings

Uncertainty about future financial needs

Limited financial knowledge or confidence

Unexpected life changes affecting income

The path to financial wellness

Financial wellness has become something of a buzzword, but the concept behind it is substantive and important.

At its core, financial wellness means:

Feeling secure and in control of your finances

Being able to manage your money effectively on a daily basis

Having the freedom to do things you want without constant money worries

The journey from vulnerability to wellness isn't immediate. It requires building resilience and capability over time. This gradual process involves addressing specific vulnerabilities and strengthening your financial foundation step by step.

Building resilience against the unexpected

Perhaps the most critical aspect of financial resilience is preparing for the unexpected. Life is full of surprises - from car breakdowns and home repairs to job losses and health issues. These unexpected events happen regularly, and without preparation, they can quickly destabilise your finances.

Creating an emergency fund or "resilience pot" provides security and readiness for these unexpected situations. While building this safety net takes time, even small steps in the right direction are valuable. Starting with modest, consistent savings can gradually lead to meaningful financial security.

The benefits of financial resilience

As you build financial resilience, you'll begin to experience:

Greater confidence in handling money matters

A sense of empowerment over your financial future

Reduced anxiety about unexpected expenses

Improved ability to make long-term financial plans

Better overall financial wellbeing

Getting started

There are various paths to improving your financial situation. Whether through one-to-one advice, digital platforms, or self-education, the important thing is to take action that works for you. Expanding your knowledge and capability is essential, but it should be done in a way that aligns with your personal preferences and circumstances.

The key message is simple: do something. Take steps, however small, toward greater financial resilience. Over time, these steps will compound, putting you on track for a healthier financial future where you feel confident, empowered, and prepared for whatever life brings your way!