Active travel and financial wellbeing: Getting people to change their habits

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Dr Isaac Tabner, Stirling Management School

Dr Frederick Changwony, Stirling Management School

Dr Kevin Campbell, Stirling Management School

Dr Gemma Ryde, Faculty of Health Sciences and Sport

A shift to active travel is one of many behavioural changes that can support the transition to net zero. In this mini-lecture, Dr Isaac Tabner and colleagues from Stirling Management School and the faculty of Health Sciences and Sport, consider how a shift to active travel can bring about financial – as well as environmental – benefits. Watch the lecture above or read the transcript below.

Welcome to our introduction to active travel and financial well-being.

My name is Isaac Tabner, and I’m working on this project with two colleagues from the Accounting and Finance Division within the Stirling Management School where we conduct research in household financial wellbeing.

We also have Dr Gemma Ryde from the Faculty of Health, Science and Sport, who is doing research in active travel and physical activity.

And our contact details are here if you have any questions following this lecture.

Our household finance research is about helping households to make better financial decisions that lead to better financial well-being.

Sixteen years ago, I helped to set up a teaching module for undergraduate students on personal financial planning which I then went on to teach and run for eight years before handing it over to colleagues.

I’ve also been commuting by bicycle for most of my professional life, and it is this combination of active travel at the personal level, plus household financial research and teaching that led us to reflect upon how our transport choices impact upon our financial well-being as well as impacting upon the environment, hence the birth of this project. Here are some statistics from the Department of Transport, from Transport Scotland and other credible sources.

For example, they show that in England alone, if active transport participation could be increased there is potential to reduce carbon dioxide equivalent emissions by between one and six million metric tons between 2022 and 2050.

One popular idea is that we should all aim to walk about 10,000 steps per day, which happens to be about five miles. While a daily five-mile walk might be a daunting target for some, five miles is a comfortable cycle ride, and two miles is an easy 40-minute walk for most people.

As most car journeys are less than five miles, the there is an opportunity for walking or cycling to take up more than half of our journeys, thus enabling us to achieve the recommended daily amount of exercise, to emit less carbon, to be fitter, and wealthier as a result. Surely this must be a win-win for everyone.

We also know that active travel is associated with reduced air pollution, and reduced traffic congestion, as well as a host of positive health and wellbeing effects.

Our first chart shows the relative modal share of different transport methods for commuting to work in the UK from the period 1991 to 2018, using data from a British Household Panel Survey and the U.K. Understanding Society Survey. We can see that motorised transport, takes up about 70 percent of the share of commuting transport over that time. Public transport accounts for about 14 percent, walking about 12 percent, and cycling about 3%. So, we can say that active travel comprises about 15 percent of the overall share of the commuting mode and thus has considerable potential to grow.

We can also observe modal shifts in that time. For example, following the 2008 financial crisis, we can see that the share of motorised transport declined relative to an increase in the share of public transport and active transport.

In the second chart, we drop out motor transport allowing us to examine trends in the other three transport types more clearly. We can see how following the financial crisis, public transport increased and there was also an upward shift in the share of walking and cycling.

Longer term, we can see that the overall share of active transport barely changed between the beginning and the end of the study period. However, the upward shift in the active transport share following the financial crisis did seem to be persistent, at least pre-Covid when this data ends.

If a financial crisis triggered a long-term change in commuting mode, it’s useful to think about how commuting mode might interact with household finances.

Obviously, more recently we’ve had the pandemic and new data is being generated all the time, showing major shifts in transport and household financial characteristics arising from the various responses to Covid-19.

Studies have shown that car ownership opens employment opportunities and is associated with higher incomes. However, not everybody can afford a private car or a taxi resulting in what is known as transport poverty, defined as a difficulty or inability to make necessary journeys due to a combination of income cost and service availability. Because walking and cycling are cheaper than motorised and public transport, various reports have suggested increasing access to active travel as a means of alleviating transport poverty.

Studies show that many people tend to underestimate the time it takes to drive and overestimate the time it takes to walk or cycle a particular journey. In addition, people often overestimate the enjoyment of driving relative to walking or cycling and underestimate, or discount, the financial costs of running a car.

We know that financial literacy and financial engagement are very low amongst the general population. Hence, it’s not surprising to find that many people struggle to undertake effective cost benefit analysis of their transport choices.

We also know that people who walk or cycle are healthier, both mentally and physically, take fewer days off sick, and are more likely to perform better at work, and in other life activities that lead to better financial outcomes.

If we consider the resource implications of car ownership and use, my own calculations show that in some situations, if you use active travel, for example, cycling to work, you can save more than £15 per day. Therefore, if you walk or cycle to work just three times a week for 40 weeks a year, you could save more than £1,800 pounds a year. That’s quite a lot of taxi rides, and quite a lot of weekend car rentals for day trips. You could also purchase a very nice bicycle and pay for the cost of repairs and servicing from this amount saving if you wanted to.

It’s also been shown that owning a car, costs somewhere in the region of £4,500 per year, depending obviously upon the financing method used and the type of car.

A basic rate tax and national insurance payer would need to allocate nearly £7000 pounds of their pre-tax earnings just to pay for the £4,500 cost of running their car because they need to earn more pre-tax than they have available to spend after tax. In fact, someone earning a UK national living wage at £8.91 an hour would need to work about 750 hours a year just to pay for their car. Seven hundred and fifty hours is a lot of time. Do we really want to spend that much of our lives paying for our car? Does owning a car really generate 750 hours-worth of ‘convenience’ and ‘freedom’ in our lives? These are questions which we can investigate.

Further, suppose a household can reduce the number of cars they own, or maybe do without a car altogether. That household or individual would have an extra £4,500 a year in their pocket.

In terms of affording to buy a home, £4,500 a year could service a £75,000 25 year repayment mortgage at current mortgage rates.

Alternatively, we know that there is a pensions crisis, in which many people are struggling to set aside enough money to enable them to enjoy a comfortable retirement. Yet, if an individual were to invest savings from not owning a car into a personal pension every year over a 40 year working life, they could increase their forecast pension income from age 65 by more than £11,500 a year potentially rising to more than £15,000 per year for a higher rate tax-payer. You many people worry that they’re not going to be able to afford to retire until they’re over 70. But this is one way of being able to retire before age 70. By making reasonable assumptions, our calculations using currently available data demonstrate that it is possible to substantially improve our retirement prospects if we can do without our car.

In conclusion, our research aims to investigate how the financial well-being implications of active travel might motivate people to change their habits and thus enable us all to reduce our carbon footprint, enhance: our financial well-being, enhance the resilience of communities, and to be healthier, happier, and to discourage the misallocation of resources on carbon intensive transport infrastructure.

On the last point, we can refer back to the 750 hours per year many people must work in order to pay for their car. A recent study in The Lancet reports that globally, birth rates are declining at a rapid rate. We also know that globally, populations are ageing due to the miracle of rising life expectancy and improved medical technologies. This means that the proportion of the global working age population is declining fast relative to those who depend upon that work. While technological advances are helpful, the likelihood is that, rather than a job shortage, we are in fact facing a huge global labour shortage, a shortage of human resources at a time when a huge amount of work is needed to mitigate and limit the effects of climate change, to recover from the pandemic, and to support an ageing population.

If someone who earns the UK national living wage is spending 750 hours a year paying for a car, in addition to a huge government expenditure of taxes and human resources on road transport infrastructure, we should all ask ourselves, is this a good allocation of resources or could those human and financial resources be allocated in a more productive way?

We need to examine questions like this, and to think carefully about how we allocate both human and financial capital as we face up to the challenges ahead.

We hope our research will provide evidence to inform policymakers seeking to encourage active travel, for example, by reducing barriers to active travel, allocating resources to active travel infrastructure, and embedding the implications of transport choices into financial and health education.

If you have any questions, suggestions, or feedback on our research project, please don’t hesitate to contact us.

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