Financial security 101

This article includes tips, suggestions and general information. We recommend that you always do your own research and consider getting independent tax, financial and legal advice before making any important decision.

What is financial security?

Financial security is generally critical to a person’s wellbeing. It boils down to how well an individual, couple, or family can cover life's essential expenses.

Here are a few common instances of financial security:

• When someone is financially secure, they typically have sufficient funds and income to pay for food, housing, health, emergencies, and any social and sporting activities they enjoy in their free time.
• In the short term, financial security may mean that someone can comfortably pay their expenses, plus other responsibilities such as credit cards or loan repayments.
• Across a longer period, being financially secure may open doors to being able to consistently save, invest, or support themselves and their family with money.

Why is financial security important?

Financial security generally matters at every stage of life. Here’s what that may look like:

• Teenagers and young adults: At this age, finishing school or university and getting a job may help young adults find independence with money. For many people, these may be their first experiences of how money can help with short-term goals, like purchasing gig or football tickets, or going on holiday with friends.

• Working-aged adults: By now, financial security is likely a constant goal and consideration. In people's peak earning years, they’re juggling life milestones like purchasing a house, starting a family, and developing their career and personal goals. Those in this group are often driven to ensure they can meet their financial responsibilities, reap the benefits of their hard work, and set the wheels in motion for a healthy and happy retirement in the years ahead.
• Pensioners: Financial security is just as important later in life. Generally, UK citizens are eligible for a state pension when they turn 66, but some choose to make private pension contributions throughout life to work toward a greater level of financial security come retirement.²

Since everyone’s circumstances and goals are different, financial security for each person might also be varied depending on their individual situation.

Key components of financial security

A sense of financial security may come from:

• Maintaining an emergency fund for unexpected expenses
• Insuring one’s home, car, family, and pets
• Prioritising repaying any debt
• Putting aside regular savings

Potential tips to help people become financially secure

Wondering how to achieve financial security? Here are some basic steps to improving a person’s sense of financial security:

1. Review expenses. Some people may like to start by reviewing their spending over a weekly, monthly, and yearly period. This can lead to opportunities to cancel any services or subscriptions that are no longer needed.
2. Make your budget. After taking stock of expenses, people generally get a better sense of their regular ingoings and outgoings. An easy-to-follow budget plan may help people create guardrails for spending. Budgets may also help form the habit of being more deliberate with money.
3. Get financial advice. People are often not alone if they worry about money. Help can be available. For some, talking to financial advisors may be the right step toward financial security. And if someone needs urgent help with their finances, they could turn to free and confidential support services such as MoneyHelper.³

Build financial security with a step-by-step approach. Consider starting with expense tracking and personal budgeting.