Context

This study was commissioned by the Money and Pensions Service (MaPS) to support its wider work to understand how financial wellbeing varies between people with different characteristics.

Previous research has shown that health and other outcomes such as education are worse on average among people living in more deprived areas. MaPS wanted to know if this also applied to financial wellbeing, which it defines as feeling secure and in control, to help local authorities, the third sector and other local organisations design and target financial wellbeing services more effectively.

Therefore, this study examined the relationship between financial wellbeing and the deprivation of a local area. It is important to note that living in an area that may be considered deprived does not mean that an individual or their household is themselves deprived.

The study

The study involved analysis of data from MaPS’s Financial Wellbeing Survey 2021, a nationally representative online and postal survey of 10,306 adults aged 18 and over living in the UK carried out between July to September 2021. The analysis was undertaken by the Centre for Personal Financial Wellbeing at Aston University to examine the relationship between financial wellbeing and how deprived a local area is, and to understand if this relates solely to income or to other, attitudinal factors.

Financial wellbeing was analysed using MaPS’s summary measure of financial wellbeing, derived from nine questions covering day-to-day money management, financial confidence and satisfaction, and longer-term financial planning and scored out of 100.

Deprivation was measured at the Super or Lower-layer Super Output Area (each comprising about 1,000 to 3,000 people) using the Index of Multiple Deprivation (IMD), which covers domains such as income, employment, education and skills, health, crime, housing and the living environment. The domains are measured slightly differently in each of the four nations of the UK. As such, the analysis was undertaken separately for each nation.

Key findings

• People living in the 20% most deprived areas across the UK had an average financial wellbeing score of 48.5, compared with a score of 60 for people in the 20% least deprived areas.
• People living in more deprived areas had lower financial wellbeing independently of the influence of income and other personal and household factors.
• The main drivers of lower financial wellbeing scores from the measures that made up the overall score were:
  • the ability to keep up with bills and payments (63% of people in the most deprived areas had difficulties doing this, compared with 35% in the least deprived areas);
  • the ability to save (32% in the most deprived areas could do this, compared with 46% in the least deprived areas); and
  • the need to borrow money if the main source of income was lost (35% in the most deprived areas could last no more than a month compared with 14% I the least deprived areas).
• Financial wellbeing was statistically significantly lower in each of the nations except Wales when the income, education and health domains of deprivation were examined individually, and this was also the case for the employment domain in England and Northern Ireland.

Points to consider

Methodological strengths or limitations

• The authors note that, for the more detailed analysis examining the individual domains of deprivation by nation, small sample sizes meant having to include additional quintiles as well as the most/least deprived quintiles for some nations and domains.
• Small sample sizes may also have prevented some meaningful differences being observed in the data (false negatives).
• Noting of the statistical significance of differences and variations is not given consistently in the report, and the threshold of statistical significance used is not reported.
• The use of multivariate analysis to control for income and other personal and household characteristics strengthens the reliability of the results.
• The technical report from the survey noted that non-internet users were under-sampled in the data and that people completing paper-based surveys may have had a different survey experience.

Applicability

• The study should be of interest to government and local policy makers and a wide range of public services, charities and other support organisations, especially those operating in areas of high deprivation.

Relevance

• The findings are relevant given MaPS’s commitment to the goals set out in its 2020-2030 UK Strategy for Financial Wellbeing, and its role in supporting delivery in each of the four nations of the UK.

Generalisability/transferability

• The findings relate specifically to UK data, and there are variations between the nations of the UK. There is likely to be some learning which transfers to similar markets outside of the UK, although these may be limited depending on the policies and socio-historical contexts of individual countries.