Using data to understand the dynamics of household finances

Our financial lives are complex, dynamic and interwoven. When something changes – a new direct debit or payroll deduction is set up for us, or we’re faced with a temporary income shock – this doesn’t happen in isolation. Effects ripple out across our savings, borrowing and spending. This is especially true for low to middle income households who tend to have less spare money on hand to deal with the unexpected.

Research into retirement saving has tended to look at this type of saving in isolation. This kind of study might conclude that a given individual should double their pension contributions to achieve a comfortable level of income when they retire. Whilst that might be true for many people, what if for some the short-term impacts of that extra expense include higher levels of ever more costly debt? The negative effects of a debt crisis can ripple through to retirement and severely undermine the benefit of increased pension savings.

This is why Nest Insight takes a holistic view of long-term savings. Through programmes like our workplace emergency savings trials, we’re finding ways to fit together the jigsaw pieces of people’s finances, making it easier to balance short- and long-term priorities. Yet we don’t always have a fully joined-up view of people’s finances. That’s why over the past couple of years we’ve been collaborating with other organisations to develop ethical, well-governed ways of matching up data from Nest with other financial datasets and academic surveys. This is helping us analyse the interactions between different aspects of household finance.

If you’re looking to answer a question around the dynamics of household finances, or you have data that could help us do so, please get in touch:

Our research programmes

Auto enrolment and debt

Most people who’ve been automatically enrolled haven’t opted out, so their employers are deducting money from each payslip to put into an illiquid pension pot. And that’s a good thing. But what if some of these people are taking on more debt to compensate for the cost of these contributions? Up to now, there’s been no way to find out whether this is happening.

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