Everywhere you look it’s the cost of living crisis, and everyone is feeling the impact of rising prices and increased household bills. But where does that leave when you have Christmas to think about?
We all have to be realistic about what we can afford this Christmas. We want to do the best for our kids and sharing your concerns with them is the first step to managing your finances and doing the best you can to meet their expectations.
Talk to your kids
Having an honest conversation with your kids about why you might not be able to get everything they ask for this year will ease the pressure and help them understand the true cost of Christmas.
Talk about the difference between needs and wants. Needs are the things we can’t do without like food and heat. Wants are the things we would like to have.
We all know that Christmas is about wants, but sometimes we have to be realistic.
Involve your kids in making your gift and food shopping list so they can get a true picture of what things cost. They might just have some ideas on how to save money.
Need to spread the cost?
If you need to borrow to spread the cost, make sure you borrow from a responsible lender like Hoot; we will only lend to you if we think you can afford it. Avoid high-cost lenders and local money lenders. Especially informal and illegal money lenders. They may be fast in handing you the money, but you would pay dearly in the long run. They are called loan sharks for a reason.
Don’t keep the pressure of managing Christmas to yourself this year. Share you concerns with a friend or family member; talk to your kids about what is realistic this year; and keep it simple.
You might find that your realistic Christmas makes a difference to your financial well-being.
As I hear on the news today that the first cost of living payments will be made on July 14th, I thought about the effect that the cost of living crisis will be having on our members.
The crisis affects everyone
The results of a survey by the Building Societies Association (BSA) published last week says that One in 20 employees would not be able to afford their living costs for a week if they lost their job. One in six would not be able to survive a month without pay and six in 10 described their bills and credit commitments as a ‘burden’.
The research said that introducing a workplace savings scheme for those who are in work, and do feel able to save a little each month, could be one way for employers to help staff improve their longer-term financial well-being.
Many of our members have been saving through payroll deduction for many years now, and have been appreciative of the ability to build up a pot for special occasions, holidays or emergencies. They will tell you that it is such an easy way to save, and helps them build that buffer of savings much needed at the moment.
But what if you are not working?
Price rises hurt the poorest hardest, because things like food and energy bills already make up a bigger proportion of their outgoings. According to the Resolution Foundation, the poorest 10% of households spend twice the share of their family budget on food and energy bills compared to the richest 10% of households. As a result, inflation rates for the poorest families could reach over 10% this year.
Of course for many members who are not employed right now, the ability to save is much harder. And we know that utility bills are the most difficult bills to keep up with. Often, the first instinct would be to borrow money to cover these bills, but many have a very limited choice for affordable credit.
Over 1,800 members are currently saving whilst repaying their loan with the Family Loan and Savings Plan. Many are saving for the first time ever, and actively plan to top up their loan and withdraw savings at key times of the year like Christmas, or just before summer holidays. This ability to save while you borrow is a key feature of credit unions.
We try to help
Last month we developed our Help Centre, aimed at helping our members find the help they need to manage day to day, and improve financial well-being. We always encourage our members to contact us if they are struggling to repay a loan. We want to help if we can and find a solution that suits everyone.
By talking to members and identifying their current challenges, we hope to do what we can to support them during this difficult time.
Millions of people use buy now, pay later (BNPL) firms such as Klarna, Clearpay and Laybuy when shopping online or in store. Managed well, BNPL can be an effective way of spreading the cost of expensive items. But getting it wrong could cost you dearly.
Spreading your costs for free over a number of weeks might seem like a good one, but make sure you’ve always got a plan in place for repaying what you owe. Even if you can spread your costs via BNPL, you’ll need the money to repay eventually, even if that’s not in full at the point of purchase.
But there are some things you should know:
BNPL is currently unregulated, which means that you will not get the consumer protection you would get with other forms of lending.
For example, Section 75 law means that your credit card provider must protect purchases over £100 for free, meaning you could get your money back if there is a problem. But if you use a credit card to pay using BNPL, the right to chargeback is negated.
The Regulator is currently looking at how BNPL should be regulated, but until then there is little consumer protection.
Miss an instalment and you will likely pay late fees. Not all BNPL do this, so check the Ts & Cs.
Missed payments can have a negative effect on your credit score as BNPL arrangements are included in the report.
It is easy to get into the BNPL habit and accumulate a number of monthly repayments without realising it. Buy five items with BNPL means five repayments to meet. So make sure you are able to make the repayments before you buy.
A recent Which report shows people in more affluent households or with families are more likely to use BNPL services. They also found that some people are using BNPL to access credit at stressful and challenging times in their life – and could be experiencing harmful consequences as a result.
Used properly, BNPL can be a useful way to spread the cost; just so long as you manage it well.
But wouldn’t spreading the cost over a longer period with a credit union loan be much more manageable?
Hoot, like many credit unions works with the National Illegal Money Lending Team in raising awareness of the dangers of loan sharks and illegal money lenders.
Research carried out by the IMLT has found that Christmas is the second highest reason that people borrow money from loan sharks. This year, there are likely to be more families impacted financially and emotionally, and illegal lenders will take advantage of those in difficult situations. Christmas is meant to be the most wonderful time of year – but for many families trapped in spiraling debt and misery by loan sharks that simply isn’t the case. We want to stop this exploitation of vulnerable people.
How do we spot a loan shark?
Loan sharks rarely give paperwork, exorbitant extra amounts and interest payments are usually added at random, and items including passports, bank cards and driving licences are taken as security on the loans.
As the debts often cannot legally be enforced in many cases the loan sharks will resort to threats, violence and other bully tactics to extort money from people.
Protect yourself and your loved ones from loan sharks this Christmas
If you need to borrow money, check the lender is reputable and authorised. You can do this by checking the FCA register at www.fca.org.uk.
Take a look at the bottom of this page and you will see a statement telling you that Hoot is authorised and regulated. You can check this on the register.
Never borrow from an individual or company that cannot be found on the register.
Be wary of people you don’t know sending you messages through your social media accounts. Loan sharks might offer you a quick deal, but they will soon trap you in a spiral of debt with extortionate rates of interest. Loan sharks have been known to use online platforms to find, threaten and control people in debt.
Think you may be caught in a illegal money lender trap?
Anyone with concerns about illegal money lending can contact the Stop Loan Sharks 24/7 Helpline in confidence on 0300 555 2222. You can also find support online at www.stoploansharks.co.uk.
Every time a loan shark is caught a Christmas fairy gets its wings.
I thought this would be a good time to reflect on our achievements in the past 15 months and marvel at the resilience of both Hoot members and our amazing staff. To do this I have written an achievement/gratitude list.
This is the first time I have done something like this, and I have found that it has had a positive impact on how I see myself. I found that I have been looking at all of our achievements in the complete wrong way! It is so easy to undervalue your achievements and focus on what has not gone well. Taking the positive view and giving yourself a pat on the back changes your outlook completely.
So here is my Hoot achievement/gratitude list:
We are all still here – I am so grateful that Hoot staff have all come through the last 15 months and are thriving. The last year has not been without its challenges and some staff have been severely affected by Covid-19, but here we are.
We know each other better – Believe me, maintaining 15 months of Zoom quizzes, activities, discussions at the start of everyday has not been easy; but we have spent a lot of time learning so much more about each other.
We have been able to help – As you might expect, some members have experienced financial difficulties in the last year, and when they have contacted us, we have usually been able to help in some way. That may have been about repayment holidays, top up loans or signposting to additional help. At the start of the pandemic we released tied savings across the Board to help members get used to the effects of the pandemic.
Our services have improved a lot – Most of our members now access the credit union online or via the App. Whilst we have been able to keep our branch open to help those who do not have access to digital services, or do not have a bank account; most of our services are carried out online or over the phone.
Our members are saving more – Despite releasing savings, members are saving more than ever before. Savings are up 21% on last year and we now look after £2.3m of member savings.
Lending has remained constant – Unlike many other credit unions, our lending has increased and members are coming back again and again in the knowledge that they have access to affordable lending. In 15 months we gave a total of £1.5m in loans.
We managed to get 1,379 new members – How amazing is that!
Try your own personal achievement/gratitude list and see how much better you feel.
