The AXA Avenue experiment has put a national spotlight on some of the key financial issues facing a huge proportion of the UK population. Without wanting to submit quick or convenient answers to these complex problems, this unique financial social experiment has presented issues that affect real people in real life situations and has investigated how having face-to-face independent financial advice can help.
The lessons learned from the participants of AXA Avenue are acutely important to the financial capability discussion. To date, the broader discussion has focused on addressing the needs of people with below average incomes, however this experiment has focused on families with average wealth and incomes. This piece of research addresses the needs of a different sector of the population and the results and learnings from this experiment will develop the overall issues surrounding financial capability and inform the industry. Throughout the past 12 months, AXA Avenue participants have tackled their debt problems, addressed their short or medium term savings concerns and maximised their pension contributions. In some circumstances, a lot more has been achieved with the end result having transformed lives entirely.
Collectively, the ten households that received financial advice are some £50,000 better off, with massive savings increases and encouraging levels of debt reduction. Whilst the households that were left to their own devices actually got poorer - they frittered away a quarter of their savings and the group saw a three per cent reduction in their net wealth
With professional advice the experiment found that you can reduce your personal debt by almost a quarter and increase your savings pot by over 40 per cent – and all in the space of 12 months. That amounts to a total saving of up to £6,000. However, the average UK adult has only saved £1,003 this year while some 61 per cent have either saved nothing at all or have only managed to set aside less than £500.
As a nation, one in three adults – or around 12.4 million people – refuse to plan their finances at all, and those that do find the time to review them set aside a miserly five minutes a week, according to new research from AXA.
However, all is not lost - the results from our experiment have revealed that people need only increase the time they spend reviewing their finances to 15 minutes a week in order to save thousands of pounds in reduced debt and increased savings.
AXA Avenue Recommendations
With learnings from AXA Avenue , Saran Allott-Davey recommends:
- You should spend one hour a month planning and reviewing your finances (currently the nation spends just 22 minutes a month doing this)
- Simplify Me – make a list with only two columns: what come in; what goes out and make sure the second column totals less than the first
- Find a financial buddy – discussing specific financial details with a friend can be tricky but having someone to encourage and motivate you to make changes can make a real difference
- Consolidate debts – it is very important to understand the total extent of what you owe in outstanding debts – what are you paying in interest? When will the debts be cleared? Consider moving your balances to 0% interest offers or consolidating your debts to reduce your monthly payments
- Clear debts before saving – try to clear as much of your debts as possible before making short term savings. The amount you pay in interest on your debts is likely to outweigh any interest you gain on your savings so clear the debts first and then watch your money grow
- Think long-term – do not put off thinking about your long term financial future. Get a pension forecast and speak to an adviser if you are concerned your income in retirement is going to leave you short. Make sure you understand the benefits of joining your employer’s pension scheme and take advantage of it
- Take control – don’t let yourself be overwhelmed by your finances but make the decision to take control; getting the right mindset is half the battle won. Use the sources available to you that will help you better understand and manage your money, from the Internet, a trusted body such as the Citizens Advice Bureau or an IFA
To find out more about our findings, download the report.
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