What are the drivers and impacts of financial stress for low-income people and what are the policy implications?

A household or individual can be considered in financial stress where they have difficulty meeting basic financial commitments or limit their activities due to inadequate funds. It is a key dimension of poor financial wellbeing and can impact overall health and wellbeing.

We explore this at a time when costs are rising, while incomes for many have stagnated. Moreover, while the COVID-19 pandemic has helped some households build a savings buffer, for others the pandemic has resulted in periods of lost income, leaving them potentially more exposed to financial stress.

This research aims to deepen understanding of financial stress and financial wellbeing, by investigating:

  • how households are exposed to financial challenges
  • how households prioritise competing needs when finances are tight and the role of family type and place in shaping spending decisions
  • how lower-income households manage financial risks and the likely long-term impacts of these strategies
  • how the experience of financial stress affects overall wellbeing.

The study includes three complementary pieces of work:

These will allow us to identify policy directions to address barriers to financial security for those in and out of work and highlight opportunities to create or adapt programs to improve financial wellbeing.

Policy focus: Insurance

Related policy work includes looking at how we can ensure insurance is affordable and accessible for all, in the context of increased risks associated with climate change. The most financially vulnerable people often live in the areas most under threat from extreme weather events such as floods and storms.

BSL, Financial Counselling Victoria and Melbourne Institute co-hosted the Insurance in a changing climate forum, which brought together stakeholders from industry, government, academia and the community sector to foster new relationships, develop shared understandings and consider potential solutions.

You can read the summary report from the Insurance in a changing climate forum and the forum program showing speakers .

Understanding financial stress is part of wider research and policy work within The SEED Project, and is being conducted by Dina Bowman , Emily Porter and Margaret Kabare .