{"id":781,"date":"2020-07-10T16:29:46","date_gmt":"2020-07-10T15:29:46","guid":{"rendered":"https:\/\/aspenfs.co.uk\/?p=781"},"modified":"2020-09-23T16:54:37","modified_gmt":"2020-09-23T15:54:37","slug":"its-not-all-tiktoks-and-likes","status":"publish","type":"post","link":"https:\/\/aspenfs.co.uk\/its-not-all-tiktoks-and-likes\/","title":{"rendered":"It’s not all TikToks and Likes"},"content":{"rendered":"

When all is said and done, there is often more said than done<\/h3>\n

Following on from my previous blog “Teaching children the value of money”, I have reached a new chapter;<\/h5>\n
As an adviser, I live the statement above, clients do not always take our advice, or may only take parts of it.\u00a0 As I am also a parent to a 16-year old, I get to live this reality at home too<\/h5>\n
\"\"I have been teaching the merits of saving for children for many years, sometimes in the hope that these practices would also guide the grown-ups to do the same.\u00a0 Over the last 26 years or so of my career, I have guided clients at both ends of life (and everywhere in between)<\/h5>\n
If I have learnt anything, it is that we need to think more as families and groups when it comes to money, rather than as individuals left to our own devices.\u00a0 The advice I give often comes from my career knowledge and a great deal of lived and learned experiences<\/h5>\n

<\/h3>\n

Financial education is unfortunately often taught by experience, rather than by the experienced<\/h3>\n

Savings are more important now, than ever<\/strong><\/h4>\n
Stagnating pay, Gig economy and zero-hour contracts<\/h5>\n
Rising housing costs<\/h5>\n
Unfunded Government pensions<\/h5>\n
Low or near zero interest rates<\/h5>\n
More reliance on property ownership to fund retirement<\/h5>\n

 <\/p>\n

The Savings Gap<\/strong><\/h3>\n
Looking as far ahead as retirement, Economists tend to base a comfortable retirement on the ability to achieve 70% of preretirement income<\/h5>\n
The International Longevity Centre (ILC), estimates that in the UK, workers average a 4% shortfall<\/h5>\n
Doesn\u2019t initially sound much, but that is after the expectation that people are saving a minimum of 10% to 20% of their income<\/h5>\n
If you are thinking, how am I going to save that amount!, there\u2019s this –<\/h5>\n
You would need to save 15% to 25% to match the retirement incomes of previous generations<\/h5>\n
I realise that many cannot afford to save much, but time and getting started early, helps with that burden.\u00a0 There is no easy answer, but there are options;<\/h5>\n

\"\"<\/p>\n

<\/h4>\n

Save more today by increasing pension fund contributions<\/h4>\n

Work for longer and delay retiring until later<\/h4>\n

Spend less in retirement and adjust to a tighter regime<\/h4>\n

 <\/p>\n

Education, Education, Education<\/strong><\/h4>\n
Before we blame the lack of savings on younger generations spending too much on shoes and video games, let\u2019s look at the research<\/h5>\n
If we adjust for inflation and exclude housing costs, those aged 25 to 34 in the UK spend less relative to 55 to 64-year olds than at any time since the 1960s<\/h5>\n
The reality is that millennials face additional financial pressures from high property prices and pay packets that have only just risen in line with inflation and less secure jobs<\/h5>\n

 <\/p>\n

My house is my pension<\/strong><\/h3>\n

If I had a pound for every time I have been told this!<\/h4>\n

So, how does your house become your pension?<\/h5>\n
    \n
  • \n
    Sell up and buy a cheaper property<\/h5>\n<\/li>\n
  • \n
    Invest the profit from downsizing to provide an income<\/h5>\n<\/li>\n
  • \n
    Borrow money using Equity Release (Lifetime Mortgage)<\/h5>\n<\/li>\n<\/ul>\n
    <\/h5>\n
    This will only help those that own a property, but home ownership rates are falling <\/em><\/strong><\/h5>\n

     <\/p>\n

    \"\"<\/p>\n

    Younger generations are finding it more difficult to buy property following the rapid rise in prices between 1996 and 2006<\/h5>\n
    Almost 60% of baby boomers owned their own homes by the time they were 30, whereas just 30% of Millennials meet that statistic<\/h5>\n
    The transfer of wealth through inheritance is unlikely to help<\/h5>\n
    On average, millennials will have to wait until they\u2019re 61 to inherit the family silver<\/h5>\n
    A consequence of high property prices is that millennials are spending more of their incomes on accommodation than previous generations. By the age of 30, almost a quarter of their after-tax income pays the rent or mortgage, compared with 15% for baby boomers<\/h5>\n
    This trend puts additional pressures on their ability to put away money for later life<\/h5>\n
    Although home ownership rates have plummeted for younger generations, expectations haven\u2019t caught up with this reality. According to the Pensions & Lifetime Savings Association, one third of 35 to 44-year-olds feel they will have no choice but to use their property to finance retirement<\/h5>\n

    Yet almost a quarter of them don\u2019t yet own a property<\/h4>\n

     <\/p>\n

    <\/h5>\n

    \"\"We need to tackle\u00a0the lack of basic financial knowledge at a time when the government is asking people to take more control of their financial futures<\/strong><\/h4>\n
    In one survey, fewer than one in three demonstrated an understanding of compound interest, the impact of inflation and why it\u2019s important to spread risk<\/h5>\n
    During 2015, market research firm Ipsos Mori asked people in the UK to estimate how much they would need to accumulate in a private pension fund to generate an annual income of around \u00a325,000 after they retire<\/h5>\n
    The average view was \u00a3124,000, with some going as low as \u00a390,000<\/h5>\n

    That is an expectation that \u00a390,000 will provide \u00a325,000 every year for approximately 25-years!<\/u><\/strong><\/h4>\n

     <\/p>\n

     <\/p>\n

     <\/p>\n

    <\/h3>\n

    Keep it in the family<\/strong><\/h3>\n
    Across the UK, every five-year cohort since those born in the mid-1950s has accumulated less wealth than the preceding group had done at the same age<\/h5>\n
    Student debts put additional financial pressures on the ability to save for retirement<\/h5>\n
    Since the government removed the cap in 2010, most English universities now charge annual tuition fees of more than \u00a39,000. Add in maintenance loans and interest payments, and a student who started a three-year course in 2017 is likely to graduate with \u00a351,700 debt.<\/h5>\n
    Meanwhile, we\u2019re all living longer, which means our pension pots will need to support everyday spending for many years, together with care costs in later life for ourselves and our families.<\/h5>\n
    You would think that based on the above, we would share family resources and parents & grandparents would set up savings plans, to teach children the value of savings<\/h5>\n
    I still see many families paying large sums of Inheritance Tax, rather than making lifetime gifts or using equity in their homes to spread wealth more evenly<\/h5>\n
    Unfortunately, something as simple as a Will or Trust can help reduce the 40% Inheritance Tax charge, but 80% of the UK don\u2019t use them.<\/h5>\n
    Often children only find out what savings their parents had when they calculate how much inheritance tax is due on it<\/h5>\n

    <\/h3>\n

    Relying on the Government <\/strong><\/h3>\n
    As income from taxation falls, the costs associated with paying pensions are rising as are the costs for providing health care and social care<\/h5>\n
    The World Economic Forum has said that governments of the world\u2019s largest economies are sitting on $53 trillion of unfunded pension commitments<\/h5>\n

    So, economies have three difficult choices<\/em><\/strong><\/h4>\n
    borrow more money<\/h5>\n
    reduce welfare spending<\/h5>\n
    increase taxes<\/h5>\n
    Increasing the state pension age is another option but it\u2019s unlikely to solve the economic challenges associated with ageing<\/h5>\n

     <\/p>\n

    Some Great Reward<\/strong><\/h4>\n
    Younger generations around the world are already accepting that they will probably retire later in life than their parents<\/h5>\n
    In the most recent British Social Attitudes Survey, which has been carried out annually since 1983, more than one in three people aged 18 to 24 and one in five aged 25 to 34 expect to retire in their 70s. Yet just 10% of people in the UK aged between 70 and 74 work today<\/h5>\n
    As we emerge into a world dominated more with automation and flexible working, Employers can help people work into later life by introducing less rigid working practices<\/h5>\n
    Studies suggest that increasing the participation rates of older workers expands the economy. According to the National Institute for Economic and Social Research, extending everyone\u2019s working life by one year could increase the UK\u2019s GDP by 1% a year, which is equivalent to \u00a318 billion in 2015 when the study was carried out<\/h5>\n

    Do you expect your children to work until they are 70?<\/strong><\/h4>\n

     <\/p>\n

    \"\"<\/p>\n

     <\/p>\n

    My journey to date<\/h3>\n

    Since she was 9, I set my daughter up with a pre-pay debit card, attached to an App so that I can oversee functions available to her.<\/h5>\n

    She learned important lessons;<\/em><\/strong><\/h4>\n
    When you spend it, it has gone<\/h5>\n
    When you save, it grows<\/h5>\n
    How much do you really want that new thing?<\/h5>\n
    When we were in a shop, she paid for her items.\u00a0 That way she learned the simple and effective lesson, that each transaction reduces what you had before<\/h5>\n

     <\/p>\n

    I have also invested a regular amount into a Junior ISA.<\/h5>\n
    As she got older, I showed her the statements, up and down.\u00a0 We also discussed the companies we had invested in and why<\/h5>\n

    Lessons learned;<\/strong><\/h4>\n
    Saving takes commitment and is a structured part of your outgoings<\/h5>\n
    There is a short-term risk, which can be managed and needs to be reviewed<\/h5>\n
    There are rewards over the longer-term<\/h5>\n
    Inflation affects everything<\/h5>\n
    Consistency and time are vital to building for the future<\/h5>\n

    \"\"<\/p>\n

    Saving is a gentle way of discussing the future, tackling expectations for the realities of life and creates a sense of openness when discussing money<\/h5>\n
    We discuss finances as a family issue and strategy, which brings continual challenges that can be dealt with.\u00a0 My goal is to get to a point where the fear and stress of finances are removed and to give her the tools to understand the risks, costs and benefits of any financial decision she needs to make<\/h5>\n
    We all have a choice with the lessons we pass on<\/h5>\n

    I am working to end generation rent, generation debt and generation financially insecure<\/h4>\n","protected":false},"excerpt":{"rendered":"

    When all is said and done, there is often more said than done Following on from my previous blog “Teaching children the value of money”, I have reached a new chapter; As an adviser, I live the statement above, clients do not always take our advice, or may only take parts of it.\u00a0 As I […]<\/p>\n","protected":false},"author":2,"featured_media":786,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0},"categories":[4,5],"tags":[],"_links":{"self":[{"href":"https:\/\/aspenfs.co.uk\/wp-json\/wp\/v2\/posts\/781"}],"collection":[{"href":"https:\/\/aspenfs.co.uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/aspenfs.co.uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/aspenfs.co.uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/aspenfs.co.uk\/wp-json\/wp\/v2\/comments?post=781"}],"version-history":[{"count":0,"href":"https:\/\/aspenfs.co.uk\/wp-json\/wp\/v2\/posts\/781\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/aspenfs.co.uk\/wp-json\/wp\/v2\/media\/786"}],"wp:attachment":[{"href":"https:\/\/aspenfs.co.uk\/wp-json\/wp\/v2\/media?parent=781"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/aspenfs.co.uk\/wp-json\/wp\/v2\/categories?post=781"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/aspenfs.co.uk\/wp-json\/wp\/v2\/tags?post=781"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}