The next generation’s need for planning may be even greater than our own
Research from the Institute of Fiscal Studies (IFS) surrounding wealth in the UK has been making headlines in recent months. The study has found that people born during the 1980s are now half as wealthy as those born in the 1970s were at the same stage in their lives. This makes children born during the Thatcher era the first generation since the Second World War to earn a smaller income when they reach their thirties than people born ten years before them.
The current average household wealth of people in their thirties is £27,000, a figure dwarfed by that of those in the same age bracket ten years ago, which was £53,000, on average. The IFS suggests that, amongst a number of reasons, the key factors behind this turn of events include continuously low rates of interest and the 2008 global financial crisis, both of which have made it much more difficult for those born in the ‘80s to build up their level of wealth. This in turn has left the generation with insufficient pension funds and lower levels of home ownership than those enjoyed by generations before them.
The study comes as yet further confirmation of the widening divide between the older and younger generations in the UK. Earlier this year, the IFS also found that whilst those under 30 have seen an average income decrease of 7% since the financial crisis, those over 60 have seen a rise of 11%. This divergence of fortunes in financial matters has in part been made possible by the pensions ‘triple lock’, which has seen the basic state pension rise in line with the highest of either consumer price inflation, average earnings or an increase of 2.5%.
With Brexit making the financial outlook in the UK more and more uncertain for the foreseeable future, the best way to protect yourself and your family from whatever the future may bring is to plan together, rather than allowing one person within your family to become ‘the one who handles the money’. As recent figures suggest that more and more people in the younger generations are saving nothing at all for their future, this is a great way to get your whole family into a positive financial mindset. That way you can protect the wealth passed down through your family into the future and engender a tradition of sensible planning and saving for generations to come.