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The Cost Of Financial Insecurity

Evidence type: Insight i


Citizens Advice helped 2.7 million people in 2017 with a large proportion reporting financial difficulties. Of those, nine-in-ten reported that they had recently been through a major change in their lives. Analysis from the Wealth and Assets Survey shows that people who have had a significant fall in income are 33 per cent more likely to fall into debt within the next two years, than those who have not. Beyond incomes shocks, wider changes in people’s lives – such as the breakdown of relationships and ill health – often result in financial difficulty. Growing numbers who have temporary contracts, variable shift patterns or zero hour contracts often face unpredictable incomes.

For the purposes of this report, Citizens Advice defines financial insecurity as having unpredictable incomes and a lack of financial resilience.

The study:

This 2018 report from Citizens Advice provides a picture of financial insecurity in UK households.

Data used within this report comes from four main sources:

  1. Analysis of longitudinal data from the Understanding Society survey – The analysis used data from waves five and six of Understanding Society, covering the period 2013-2016.
  2. Analysis of the Living Costs and Food Survey - Survey data from the 2015/16 Living Costs and Food survey was used to calculate the amount of essential expenditure as a proportion of weekly disposable household income.
  3. Ten in-depth interviews with people experiencing volatile household finances – these interviews comprised a selection of people varying by age, gender, income, health, employment status and housing tenure. The interviews took place in August and September 2017.
  4. A representative survey of UK adults - A nationally representative opinion poll was commissioned by Citizens Advice, with a number of questions relating to household finances, life events, debt, savings, expenditure and other behaviours. The online survey was conducted by YouGov, and ran in June 2017 with 2,116 respondents.

Key findings:

  • About one-in-eight (13%) UK adults say their income changes significantly from month to month.
  • Almost half (48%) said they experienced at least one monthly drop in income in the past year, with the average largest drop being £385.
  • These unpredictable finances are often inevitable, and can be the result of unexpected expenses, major life events and changes at work.
  • As well as unpredictable finances, people are often not financially resilient. With household saving at a near record low, many people have little or no financial buffer when things go wrong. Almost one-in-ten (9%) of households spend at least 80% of their income on essentials like food, housing and fuel.
  • The research showed that people with unpredictable incomes were more likely to have drawn up a budget or a spending plan.
  • More than one-in-five people (21%) with unpredictable incomes have gone without food or other essentials in the past year, compared to just 8% with stable incomes.
  • A quarter of people on unpredictable incomes used an overdraft to pay essential costs like food, utilities or rent in the previous 12 months, compared to just 10% with stable incomes. The interviewees also described borrowing to avoid default charges on bills or to afford large household items such as a new freezer or washing machine.
  • People with unpredictable incomes are twice as likely to have paid overdraft charges and five times more likely to have used high-cost credit than those with stable incomes.
  • The report concludes by stating that while where are no easy solutions to solving financial insecurity, the following approaches may help:
    • Making sure credit products don’t push people into unmanageable debt, suggesting the extension of a credit cap to all types of high-cost credit.
    • Alternative borrowing options for those who can’t afford to borrow from affordable commercial lenders.
    • Helping people to build savings buffers, with the Government concentrating on those people with no savings at all.

Points to consider:

Methodological strengths and limitations:

  • The analysis only included households where the inhabitants were consistent across the two waves of Understanding Society. The authors acknowledge that this selection is not therefore representative of all UK households, though do say this is likely to mean that the figures reported underestimate the extent of household income volatility.
  • However, the report uses a range of reputable datasets, so we can be fairly confident that the trends and patterns evidenced are at least broadly representative of general patterns in the UK.


  • This report is of clear interest to Government, policymakers and other stakeholders with an interest in influencing policy concerning financial insecurity. It is of particular relevance to those looking for new ways to aid people who have unpredictable incomes.

Generalisability/ transferability:

  • The results of this research can be seen as a reasonably robust picture of financial insecurity throughout the UK.
Contact information

Gwennan Hardy, Joe Lane Citizens Advice