Contributes to ‘Financial Hardship’
The University of Sheffield and comparethemarket.com launch
first ‘Institute of Inertia’ – examining the truth behind behaviour costing the UK £7.6bn.
• ‘Inertia’ now a serious issue for UK households, with new research showing a national cost of £7.6bn
• New Institute of Inertia will explore why we do things that can make us time, health and money poor and aims to make us altogether better off
• Research shows we avoid monitoring financial situations to make us feel better
• We fall into different ‘inertia’ behavioural types including head in the sand otherwise known as the ‘ostrich problem’. Online test launched to help people understand their barrier to action
• 53% of people admit to never having switched a household utility despite almost a quarter (24%) worrying about their finances at least once a week
• Think Tank due to release second report at the Conservative Party conference 2015
Academic research commissioned by comparethemarket.com and released today in partnership with the University of Sheffield heralds the founding of the first Institute of Inertia. The Institute has been established in the wake of alarming findings which reveal the extent to which inaction, or ‘inertia’, can make us time, health and money poor. A range of experts* will join the Institute, meeting periodically to discuss the latest research findings in the hope of proposing real-life solutions relevant to the general public.
The Institute of Inertia
Dr. Thomas Webb, Social Psychologist at The University of Sheffield, who will lead the Institute of Inertia’s research, describes a sense of ‘inertia’ to peoples’ actions, especially in relation to personal finances. Dr. Webb, says: “The fact that people could save money is widely documented, but we know less about what causes people to spend more than they need to. We suspect that one reason could be ‘psychological inertia’ – this is the idea that people can be resistant to change and so keep doing things (or not doing things) even if they are not in their best interests. There is the potential for this to contribute to the UK’s financial hardship.”
Dr. Webb goes on to say: “One of the most significant challenges facing science and society is how to promote lasting changes in people’s behaviour. What kinds of interventions influence the behaviours that lead to obesity or persuade people to use less energy in their homes? One reason that people might struggle to change is that they fail to monitor the relation between their current behaviour and their desired behaviour. The Institute will investigate this idea – and other possible reasons for inertia - across a number of areas affecting peoples’ finances.”
Paul Galligan, Managing Director at comparethemarket.com said: “ We have identified that consumers face real issues when it comes to managing their finances and there is a need to give consumers the help and tools that they need to be able to have better control over their money. Our ambition is for the Institute to develop real, achievable and simple ways to tackle behavioural barriers and inspire people into action. This is a long-term commitment, bringing a range of experts together to see how we can best help consumers to make better financial gains over time.”
The active disregard of an individual’s current standing relative to actual goals has been termed the ‘ostrich problem’. The Institute will seek to explain why the ostrich problem exists and test avenues for intervention.
In time for the party conference season in early October, Dr. Webb will be working with think tank Social Market Foundation to compile a report on how the Government can help households overcome inertia.
A new report on the issue of Inertia, downloadable here, questioned 2,052 people to understand attitudes towards household finances. Almost a quarter (24%) ‘worry’ about their household bills at least once a week, rising to more than a third (40%) on a monthly basis. The issue of inertia is laid bare with findings that highlight the lack of action when it comes to tackling the issue now costing the UK £7.6bn. Just 30% said they had a budget which they were ‘good at sticking to’ whilst the same number (30%) were the minority in saying they ‘shop around for the best deals’. More than one in five (21%) said it had been longer than a year since they even ‘researched saving on their household bills.’
When it comes to direct action, 53% admit they’ve never switched a household utility bill (excluding moving into a new property). In the last five years, people are more likely to have changed their hair style (52%), favourite supermarket (50%) or even favourite tipple (66%) than their current account (just 26%). A realisation of ‘overspending’ was singled out as the biggest factor in prompting switching of a household utility.
The research found that people’s desire to save on household bills is still strong however. When asked about how much would need to be saved over a year using a price comparison website to warrant a 30 minute review of household bills, well over a third (44%) said £100 would be the trigger point. This rose to 75% at £1,000. The Institute of Inertia will look at levels of awareness on possible savings given research from comparethemarket.com found up to £1,523 could be saved when comparing car, home and energy bills.
Where’s Your Head At?
To mark today’s launch of the institute, an online test has been developed to help people understand how they could improve how they deal with their household bills. Whether a person has their ‘Head in the Clouds’, ‘Head in the Sand’, or makes decisions that are ‘Heart over Head’ the test provides tips based on an individual’s results. The quiz can be found at www.instituteofinertia.org
For more information on ‘inertia’ and the Institute of Inertia including updates on its progress and regular commentary from the institution’s expert panel please visit: www.instituteofinertia.org