Millions of UK households that appear financially secure could struggle to absorb an unexpected financial shock, research from Yorkshire Building Society and the University of Bradford suggests.

The Building Financial Foundations Barometer, based on data from 10,000 UK adults, puts the average UK Financial Wellbeing Score at 680 out of 1,000.

That places the typical household in the report’s amber category, described as broadly stable but exposed to disruption caused by factors such as higher living costs, debt or an unexpected change in circumstances.

Approximately a third of households fall into each of the research’s red, amber and green categories, indicating that apparent financial security does not necessarily translate into resilience.

SAVINGS AND HOUSING COSTS PROVE CRITICAL

The analysis identified four factors associated with households becoming either more financially resilient or more vulnerable.

Having savings equivalent to three months of essential spending was associated with a significant improvement in financial wellbeing, while even a modest monthly surplus was linked with greater resilience.

By contrast, financial wellbeing deteriorated when housing costs exceeded 40% of household income or unsecured debt rose above £5,000.

The researchers found that a lack of financial buffers was the most common weakness across different age groups, income levels and regions. Higher-income households were also found to be vulnerable where they lacked savings or experienced significant life events.

The study considers financial security, financial resilience, financial literacy and confidence, and vulnerability to life events rather than relying solely on measures such as income or credit scores.

Tina Hughes, director of savings at Yorkshire Building Society, said: “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.”

Dr Kamran Mahroof, who led the research at the University of Bradford, 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.”

The report was published during UK Savings Week and is intended to provide households, organisations and policymakers with a framework for assessing the factors that can increase exposure to financial shocks.