Thursday, 9 February 2012

UK families are slowing going bust……

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.

Wednesday, 8 February 2012

Children are like sponges – let’s not waste time

My tweeting has been quiet of late partly because I have been trying to get the financial education message out there, this has been a challenge but there are some exciting opportunities.

One of the most exciting opportunities is through our charitable trust where we are going to help two charities in Bristol which deal with homeless people and young people from socially deprived areas. One of the areas we will be helping with is in the area of basic financial education which is vital as these people move to independent living.

Today I saw a link to a paper called the Financial Education and the Curriculum which discussed the pending changes to bringing financial education to schools. The proposed changes are due to come in, in 2014 but in reality it could be years. The problem is that we need it now and if 31% of schools don’t see it as a priority then we have a problem.

One thing the report pulled out was that 42% of respondents would welcome volunteers from the financial sector however it appears that although there are plenty of opportunities for schools to take this they are not doing it. This to some extent is my experience of schools. Through our charitable trust we are offering schools free education lessons to children but to date no school has responded or accepted this. When speaking to other charities offering financial education I was warned this would be a challenge.

Over the last few weeks I have spent time at home doing our New Year budget, writing down our financial goals and basically setting targets for this year. Having been out of work twice in three years our finances are not healthy but we have targets and goals. My daughter who is just starting in secondary school sat with me last night and I explained it to her, I was so surprised how quickly she understood the concepts of financial management. She also understood that to start with she might need second hand furniture or go without rather than saddle herself with debt which she might not be able to pay back.

The point is that children are sponges and they soak up information. If we don’t go to them now then we are wasting another generation. Children need to understand about basic financial management, and they need to understand that the “now” culture comes at a cost.

This paper is excellent but my challenge is who is going to speak to these schools and say there are people knocking on your door offering your pupils free financial education classes you must take them up.

If you are involved with Financial Education in the Bristol area it would be good to share experiences and work together.