Millions of households are at risk of future financial shocks, new report shows

Millions of UK households who appear financially secure could be vulnerable to future financial shocks, according to a new report by Yorkshire Building Society in collaboration with the University of Bradford.

Drawing on data from 10,000 UK adults and advanced predictive modelling, the report finds that many households which appear financially secure today are actually ‘stable but exposed’ to future financial shocks. The average UK Financial Wellbeing Score (FWS) is 680 out of 1,000, placing the typical household in the amber category: broadly stable, but vulnerable to disruption from rising costs, debt or unexpected life events. 

Around a third of households fall into each of the report’s red, amber and green categories, highlighting the scale of financial vulnerability across the UK.

The analysis identifies four key factors associated with movement towards greater financial resilience or increased vulnerability. A savings buffer equivalent to three months of essential expenses and even a modest monthly surplus were associated with significant improvements in financial wellbeing. In contrast, wellbeing declined sharply when housing costs exceeded 40% of household income or unsecured debt rose above £5,000. The findings show that financial wellbeing is shaped not only by income, but also by whether households have the financial flexibility to withstand unexpected shocks such as job loss, illness or relationship breakdown.

The findings further show that a lack of financial buffers is the most common weakness across age groups, income bands and regions. Against a backdrop of sustained pressure on household budgets, the report recognises that building savings may be difficult or simply not possible for many people. It therefore focuses not on prescribing how much people should save, but on improving understanding of the factors that can leave households more exposed to financial shocks. Higher-income households are not immune, with the analysis finding that even those with good financial security can be vulnerable if they lack savings or experience significant life events.

Tina Hughes, director of savings at Yorkshire Building Society, commented: “This research shows that financial wellbeing cannot be understood through income alone. People across different income groups can be vulnerable to a sudden change in circumstances, particularly if they have little room in their household budget or no financial buffer to fall back on.

“We recognise that continued pressure on living costs means saving is difficult, and for some people may not currently be possible. This framework is not about judging individual circumstances or suggesting there is a simple solution. Where people are able to put something aside, the findings show that even a modest buffer can make a difference over time. UK Savings Week provides an opportunity to raise awareness of that, while encouraging a wider conversation about the support people need to build greater financial security.”

Leading the research from the University of Bradford, Dr Kamran Mahroof said: “The data shows us clear thresholds - each extra month of savings runway delivers a step-change in resilience. The data shows that financial resilience isn’t just about income; it’s about having buffers to absorb life’s shocks.”