Amid soaring inflation and rising food and fuel prices, terms like financial literacy and spend management have emerged as some of the biggest buzzwords in recent months.
The concept is simple. Healthy spending habits and financial prudence can help protect households from falling into unmanageable debt and ensure they have some enough savings as a buffer against further economic shock.
In the U.K., for example, the Office for National Statistics recently announced that the Consumer Price Index (CPI), a well-known indicator of inflation, had jumped by 10.1% in the year to July, signaling a double-digit inflation rate for the first time since 1982.
In these unprecedented times, it comes as no surprise then that financial literacy and household budgeting have become urgent issues, both on the national agenda and for consumers.
Read more: PYMNTS Intelligence: How Financial Literacy Affects Consumers’ Digital-First Banking Preferences
Digital-first challenger banks such as Monzo, Revolut, and Starling have stepped in by rolling out new features that help customers manage their money more effectively. These smart tools have been designed to give users a clear picture of their spending patterns so that they can save and budget using detailed spending reports.
Related: Revolut’s ‘Pockets’ Tool Aims To Help People Organize Payments
These digital banking apps can also provide notifications to help keep budgets on track, and bill management features like Revolut Pockets and Monzo Pots enable users to organize payments and allocate a portion of their monthly budget to recurring payments.
Difficult Task Awaits Next UK PM
For Brits living on the breadline, no amount of budgeting is likely to fully absorb the impact of price hikes that has already led to the average U.K. grocery bill increasing by £380 year-over-year (YoY).
Read more: UK Shoppers Feel Squeeze as Average Annual Grocery Bill Rises by £380 YoY
But to provide some relief, the country’s Department of Work and Pensions (DWP) took an initiative last month and made the first installment of a two-part payout to recipients of means-tested and disability benefits, as well as pensioners. Eligible citizens received a direct bank transfer of up to £326 ($384), with a second payment expected in the fall.
See more: UK Government to Pay Out $43.6B to Support Households
However, more will be required to help struggling British households keep their heads above water, and strong financial management will become increasingly important in the months to come.
This is even more critical as households are expected to come under intense pressure this fall from a rise in energy bills that will drive inflation above 13%, the Bank of England (BoE) estimates.
The BoE also predicts that the U.K. will enter a recession in the fourth quarter of 2022, while unemployment is expected to rise in 2023 as the bank pursues monetary policies to bring inflation back down to its 2% target.
Amid this impending recession and the BoE playing a delicate balancing act between controlling inflation and unemployment, the next U.K. prime minister has a heavy task.
In fact, the U.K. cost of living crisis has come to dominate the ongoing Tory leadership election which will determine the next U.K. prime minister, with rivals Rishi Sunak and favorite Liz Truss putting forward competing visions for how best to manage the country’s financial struggles.
Learn more: Crypto Champion Sunak Faces Digital Internationalist Truss in UK Leadership Race
But no matter how the race plays out, questions over how to fund proposed tax cuts and whether or not the government will commit to further spending to help cover soaring prices will need to be urgently addressed by whoever takes the helm of British diplomacy and moves into 10 Downing Street next month.
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