Over a period of twenty years society has changed to a need “now” culture, if we want something we can get it. But this is fuelled in many cases by debt; the recent paper on funded childcare provision, and the way we fund university education just highlights the way we think. All of this is built up on the assumption that one day we will have the money to pay back these debts.
This is a dangerous assumption especially when you consider that the average family is earning just £2,645 p.m. (this takes into account child tax credit and child allowance). This sounds a lot but when you take into account the mortgage, council tax, water rates, gas, electricity, phone, broadband and television licence this quickly drops to around £1,600 p.m.
Of course we have to live and assuming careful budgeting a family of four can survive on around £430 p.m. to cover food and housekeeping. We all have a car and taking into account tax, insurance petrol and general running costs this can cost as much as £175 p.m.
Suddenly the the healthy £1,600 p.m. drops to £995 p.m. If we consider the cost of getting children to school, after school child care, and school activities for two then putting aside £100 p.m. is not unrealistic. With the cost of shoes and clothes perhaps £50 p.m. and of course everyone wants money in their pocket to cover an occasional drink or perhaps a sandwich at lunchtime, cost about £300 p.m.
This leaves us with just £545 p.m. Now of course this still seems a lot but everyone wants a holiday so say the average holiday (whether taken in one go or as a series of mini holidays) is £2,000 that is £160 p.m. Then factor in birthdays and Christmas say another £100 p.m. and now we are down to £285 p.m.
What I forgot to add is that you need to pay for your pension in retirement, and also build up a fund for emergencies. So say you put aside £100 p.m. for emergencies, that leaves you with £185 p.m. to save for retirement.
Assuming a male and female age 35 retiring at 65 with no employer contribution and a full state pension that would give them around £1,387 p.m. (net) in retirement.
What I didn’t factor into this was that the average person in the UK has £7,900 in debt, assuming a rate of 6.1% over 36 months this would cost £240 p.m.
Perhaps now we understand why financial education is so important and any delay by schools and government is going to cripple an already crippled society.