A changing society may be a good thing

Millions of UK homes now rely on two salaries to stay ahead of their debts according to a survey by Scottish Widows.   This is a major social change from when most of us were children, but it does raise a lot of questions about what is good and what is bad.  In many cases, it all depends which side of the fence is surveyed, and who is compiling the report.

Their research claims that 44 per cent of households need two salaries.  Of the 7.1 million households with dependent children, 3.5 million need two salaries to ward off bankruptcy.

The bank’s survey linked this to a lack of savings, claiming that more than one half of all UK households are able to save two months’ salary.  This is one month less than the 3 months analysts claim is needed in case of an emergency.

Richard Jones of Scottish Widows claims that the report’s findings reflected social trends.

"Our report reveals that the mixture of relatively low interest rates and high job security means borrowing has been an attractive option in recent years," he explained.

"The problem is that servicing this debt eats into our take home pay and exposes us to financial hardship should we be unable to work. Low inflation also means debts are eroded more slowly over time – again increasing the need for financial protection."

Other reports have made the same claim, linking the two-income household to a variety of social and economic problems.  It also reflects the struggle experienced by single parents, especially those in low income levels, or those repaying debts accumulated while they were married.

The average household with two dependent children has accumulated more than £100,000 of debt.  This is one-fifth more, £20 000, than the debt accumulated by the average households that have no children. 

You could jump on the ‘debt mountain’ bandwagon and cry for reform, or you could ask yourself if this 1/5 increase is the result of these people buying larger homes.

Unfortunately, young adults fair no better.  Engage Mutual released research that claims that many people under 25 years old are still living at home.  In my day, they already would have had their first child.   Again, it makes me ask if the report takes into account all factors.  After all, putting off marriage, saving for a down payment, and living at home can be seen as ‘fiscal responsibility.’

Especially in light of other reports which claim that many young people are forced to support their 50+ parents, or inherit a mortgage.  It might be a good idea for someone to dig a little deeper.

Not to worry – too much.  Those who are moving out and setting up their own homes are ahead of the game.  Our grandparents purchased their first home when they were 30.  Today’s youth are purchasing their first homes when they are 25.  In some ways, this puts them 5 years ahead of the game.

"Young people today face a very different financial landscape than today’s retirees faced forty years ago," said Karl Elliott of Engage Mutual.

"With consumer debt at an all-time high, 125 per cent mortgages readily available and credit at our fingertips, today’s young generation has become more accustomed to living with debt. As a result, attitudes to financial milestones are changing.

"While it is encouraging to see that today’s under-25s are not put off by ever-increasing house prices, it is important that they are as prepared as possible when it comes to savings. By putting away a little and often over the long-term, both parents and off-spring can cope better with the financial milestones to come."

The condition of some pensioners makes us wonder why save money at all?  The pre- WWII generation saved, and now many of them are broke.  Not that savings is bad, but it does make some people wonder if young people are smarter.  Buying their home earlier, building wealth earlier. Even if they do lose the ‘luck of the draw’ they are still 5 years ahead of their grandparents in re-establishing their lives and lifestyles.

It does leave many people wondering whether they made the right choice.  A life in debt is a burden, and a stress.  It is like gambling with time instead of money.  If you win, you win money. If you lose, then you get to see how strong you are.  Falling is easy to do.  Getting back up can be a real kicker. 

I find that reading reports always leaves me wondering if anyone sees the big picture.  True.  More mothers are working, but should the question be, ‘are their children living a better lifestyle?’  It also raises the question of whether these 25 – 30 year old mothers are working to repay student loans and mortgages. 

The reports are released regularly, each claiming their statistics prove a point. I’m waiting for a report that tells us whether our parent’s attitude was more profitable, or if this generation has figured out a better method of enjoying their life. It is something to ponder.