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When it comes to personal finances, many of us assume that we’re just naturally quite good at it. Until, that is, you get to a point in life when something happens to demonstrate that you’re not. For example, when the budgeting goes awry or you realise that you’ve totally forgotten to add Stamp Duty on to the price of a property purchase. If you’ve ever found yourself in a situation where you feel like a bit of a financial dunce then you’re certainly not alone. A survey by pollsters Ipsos Mori shows that many Brits are way off the mark when it comes to having a realistic perspective on personal finances, from the cost of raising kids to how much you’re likely to need for retirement.
The survey by Ipsos Mori, conducted in 2015, highlights some fairly serious knowledge gaps within the UK population. For example, those surveyed thought that the total cost of raising a child was around £50,000. Most recent studies peg this closer to £229,000 per child – nearly five times the guess! Public opinions on student debt were also similarly off the mark. The survey indicated that most people thought students left university with roughly £21,000 of debt. The reality? More like £40,000. And then there’s the pensions issue – in order to retire with an annual pension income of £25,000 a year the average Brit thought you’d need around £124,000 in your pension pot. In reality, to achieve this kind of income you’d need a pot of £315,000 or more!
The Ipsos Mori survey also identified that Brits are all spot on when it comes to identifying the price of a pint of milk – so all is not lost. However, the gaps we do have in personal finance knowledge relate to some fairly significant life events and that’s worrying. Even more worrying is the level of debt that exists (UK adults have an average debt of £30,661) and the damage that is being done to credit ratings by spiralling debt problems. When all these are combined it indicates that it might well be time to take a different look at how the standards of personal finance education could be improved.
Personal finance education isn’t something that many of us make a priority, not for ourselves or for the next generation. However, it’s crucially important that Brits start getting to grips with the reality of debt, pensions and life’s major costs to avoid future issues. So, how can we help ourselves?
Personal Finance Education Group (pfeg) – pfeg is all about equipping our children and young people with the skills, knowledge and confidence in money matters to thrive in today’s society. Their website contains a wealth of resources, from articles and information, to videos on how to teach financial education.
The Money Advice Service – get free financial help and information across a wide range of finance-based topics. The MAS is designed to help you increase your financial know-how and aptitude, as well as that of those you love.
Citizen’s Advice – CA provides free and impartial personal finances advice and is also campaigning on an ongoing basis on issues such as finance industry regulation and ensuring individuals understand their own finances.
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read about Alex Hartley
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