Why understanding volatility matters

Read the Impact brief: Why understanding volatility matters (PDF)

Our entire financial system is built around an assumption that people have regular monthly income and spending. But that’s often not what happens in reality, and the impact of this is most strongly felt by people on the lowest incomes.  

With our partners at Glasgow Caledonian University and the Centre for Personal Financial Wellbeing at Aston University, and the support of the Aviva Foundation and the Money and Pensions Service and powered by Moneyhub, we set up Real Accounts to understand how people deal with volatility, by following the financial lives of 44 low and middle income families across the UK. Using first-hand stories from monthly interviews, along with digital financial transaction tracking, we are building an in-depth, in-the-moment understanding of households’ income, spending and money management strategies over time.   


We’re now starting to share the early findings from the first six months of research. In this first Impact Brief, we take a look at what we’ve found so far about the challenges faced by millions of people in the UK living on variable pay. 


It’s already clear that volatility creates acute additional demands and burdens upon households living on variable pay – and that there is a real opportunity for policymakers and financial services providers to understand this volatility better, so they can meet people’s needs. 


Between now and summer 2024, we’ll be sharing more about what we’re finding. We’ll explore how people on volatile incomes have to innovate and build their own solutions to manage their finances, when products available don’t meet their needs. And we’ll reveal how pursuing resilience can cost people more than it benefits them when they’re working against a system that wasn’t built with them in mind. 

We will take an in-depth look at the data on the drivers and impact of income volatility, and the opportunities to disrupt cycles that erode people’s financial resilience. We’ll introduce the ‘volatility premium’ and examine the ways that life is more expensive if you are on an irregular or unpredictable income. And we’ll explain more about how we conducted the study, and how we hope our research can be built upon.  We’re pleased to have the support of Fair4All Finance for the next phase of the programme.


We hope you’ll join us in finding solutions for households on volatile incomes, and consider how you might be part of the impact of Real Accounts. Please contact insight@nestcorporation.org.uk to find out how you can be involved.