Financial Crisis Of The 18-40s

[powerswitch_gd]

http://money.guardian.co.uk/news_/story/0,,1741079,00.html

An official government study into Britain's personal finances reveals a lost generation of 18- to 40-year-olds unable to cope with debts and soaring house prices, with alarmingly low levels of savings and little hope of building a decent pension.

The study, by the Financial Services Authority (FSA) and Bristol University, published today, is the biggest of its kind undertaken in Britain. It paints a picture of a generational divide fuelled by higher education costs and the collapse of company pension schemes - with 42% of adults now with no pension and 70% with no meaningful savings.

[Cinnamon]

I love the way how the article is so full of good tips -- informing people that they should save, should get a pension...

... unfortunatly, there isn't a tip on how to get the £££ to pay for all of this.

You could also view headline "Financial Crisis Of The 18-40s" as "Britain's workforce going broke".

That said, I'd love to see what the figures are that only account for the 26-40 year olds -- but the FSA report that is cited is not yet available.

[right_freds_dead]

... unfortunatly, there isn't a tip on how to get the £££ to pay for all of this.

thats the bit on every property program that everybody seems to just sort of skip over......

[JonoP]

Ummm, correct me if I am wrong the article ACTUALLY says there are less than 1% of 18+ people with serious money issues and that it does not matter that we owe a collective $trillion

[Cinnamon]

"Worries over Britain's £1 trillion debt mountain may be overstated. The report found that only 1% of over 18-year-olds - equal to 500,000 people - have severe financial problems, although 6% of people (around 2m households) face a "constant struggle" to keep up with commitments."

That depends what you define as 'severe financial problems' -- if you change the decision threshhold you can manufacture this figure at will.

Note the 'over 18 years olds' -- that would presumably include everyone else in the UK, but not the 18-40yrs group we were speaking of.

So, with all those trojan numbers and fuzzy descriptions in the article, it is impossible to figure out what the actual result of the study was!

And never mind the figures, but note that the most productive group in the country is in dire straights, when they should be the engine of our nation.

[CaptainClamp]

Ummm, correct me if I am wrong the article ACTUALLY says there are less than 1% of 18+ people with serious money issues and that it does not matter that we owe a collective $trillion

Here's the numbers it states:

* 42% of adults now with no pension and 70% with no meaningful savings

* one-quarter of adults aged 20 to 39 have fallen into financial difficulties over the past five years

* 5% of over 60-year-olds likewise

* 24% of young adults are currently overdrawn (no age range given)

* 11% of over-50s likewise

* 4% of over 60s likewise

And

"Over 40% of 18- to 20-year-olds failed a question on interest rates and percentages, compared with 14% of people aged 50 and above."

I'd love to see the question actually. Maybe they phrased in shillings and crowns or something

Then near the end:

The report found that only 1% of over 18-year-olds - equal to 500,000 people - have severe financial problems, although 6% of people (around 2m households) face a "constant struggle" to keep up with commitments.

They don't really define 'severe financial problems'. If I were asked to define I would probably say that it means that your outgoings exceed your incomings significantly and you have no chance of sorting your debts out without an IVA or going bankrupt.

And this is just at this particular point in time. Over your working life from age 18 to 65 if you had a 1% chance of getting into 'severe financial problems' in any given year it would mean that you had a 47% chance of getting into them over your working life.

These are very striking figures I think:

* one-quarter of adults aged 20 to 39 have fallen into financial difficulties over the past five years

* 42% of adults now with no pension and 70% with no meaningful savings

70% with no savings is going to hurt when the recession comes.

Edited March 28, 2006 by CaptainClamp

[ajh]

I opened this thread wondering how an Economic History topic had got onto HPC.

Because there was a Financial Crisis in the 1840's; it was caused by a Railway building bubble that burst (and made worse by the Irish Potato famine)!!

[Flash]

So that people can actually afford to save for retirement, they need to spend less on servicing debt. Therefore, the cost of basic housing must be allowed to fall, but politicians don't have the stomach to confront this fact.

If interest rates rise, obviously debt servicing costs will also - this will cause some short-term pain. But longer-term it will also take away much of the incentive to borrow and will reward saving, which is what is needed.

Whilst the population is no longer scared of large debts, many are also not scared of getting into difficulty either. Bankruptcy doesn't carry the stigma it used to. I suspect that when the debt bomb blows and the housing bubble goes with it, many people (far more than last time) will just walk away from their negative equity. The prevailing opinion will be: If the Building Society valued it at X, and it is now worth X minus 20%, then tough, that's their problem!

[MarkG]

So that people can actually afford to save for retirement, they need to spend less on servicing debt.

Bingo. Not only that, but they need low inflation and interest rates that encourage saving.

The money simply doesn't exist to pay high taxes, pay big mortgages, live even remotely decently and save a reasonable amount to retire on, all at the same time. One or more of those has to give, and high house prices are the most likely.

[29929BlackTuesday]

I opened this thread wondering how an Economic History topic had got onto HPC.

Because there was a Financial Crisis in the 1840's; it was caused by a Railway building bubble that burst (and made worse by the Irish Potato famine)!!

I thought that too. "You say potato - I say potato famine - let's call the whole thing off"

[Bingley Bloke]

... unfortunatly, there isn't a tip on how to get the £££ to pay for all of this.

thats the bit on every property program that everybody seems to just sort of skip over......

Of course it is. It's easy for people to advise people with money what to do with it, but give them the challenge of helping someone without any get some and they suddenly become very quiet.

The usual response to my complaints about unaffordable housing is 'get a better paid job'... like I haven't been trying to do that for several years Bradford is so overcrowded with no-hopers there's competition for the minimuum wage jobs... so who's going to pay anything more than that? I also hear 'why don't you move'... Um... yeah... and how exactly is that possible when everywhere else actually costs even more to live in?