To think most people my age (32) are making huge financial mistakes?

[ThatPinkHedgehog]

I see so many people in their late 20s and early 30s struggling financially - overspending, not saving, relying on ‘buy now, pay later,’ or just assuming they have time to figure it out later. AIBU to think that financial literacy is seriously lacking in my generation? What do you think the biggest mistake is?

Go back to the 60s and 70s and the average person didn't need a high level of money literacy as it was all a lot simpler. You got paid in cash, you paid your bills in cash. Most people put a bit into several envelopes/jars every week for each bill so that there was the money when it was due to be paid. Budgetting was so much simpler. Life insurance was the salesman coming round on his bike door to door with people paying him a few pence per week. Rents were cheaper and rental properties plentiful, lots of people had employer provided homes where the employer took a nominal rent out of their wage. No credit cards, no overdrafts, no hire purchase, no leases, etc. Closest thing to a lease was renting your TV from Redifusion!

"Life" finances has got a lot more complicated, but there's been no corresponding improvement in life finances education. It's a national disgrace that we're not teaching people about pensions, debt, loans, leases, mortgages, rents, contracts, etc., as virtually everyone will be entering into financial contracts from the day they leave school, even if just a mobile phone contract, and they're really not equipped to cope with the obligations and liabilities they're taking on.

So many posts on here and other fora, "how do I get out of my car lease", "can I leave my rented house early if it's on a one year lease", "I took out a car loan for £10k but already paid off £5k but they say I still owe £8k - how can that be?". Financial illiteracy is rife.

You seem to keep missing the part where I say "the options are different but there is still a choice".

The single mum you speak of. When she was young and single, what choices did she make to get to the point where she has no money behind her and now can't get the bus to work because she's got sole responsibility for her children? Did she decide not to save, decided to have children before she had a security cushion, decided not to pursue a career? Decided to leave all the finances to her partner (because single mums don't create the babies alone) who then ran off?

None of those are bad choices if they make you happy. But they are still choices. I chose not to have children til I was in my 30s and we both had decent, flexible, more senior positions. I chose not to have children til we had been able to buy a house. I accepted that this might mean I didn't get to have children, if I couldn't get myself to a place I was comfortable with it.

My friend chose to have children while living in a council house with a man she didn't actually like, because what she really wanted was children. They were together 17 years before he chose to leave. She chose to work part time in a low paid role, despite having the qualifications to go into a better paid role. She actually chose to turn that down because she wanted to be at home more. Fair choice, hers to make. But should she then be able to complain that she doesn't have enough money and she has no choice but to go into debt?

Some people have a run of bad luck, I've had it too. But there's still options to decide between and those choices put you on a different path.

It is. And it's easily achievable with a little knowledge. Just repeating here, the NEST performance statistics. A properly diversified portfolio could do even better (I got 18% last year on a SIPP I manage for a dependent).

www.nestpensions.org.uk/schemeweb/nest/investing-your-pension/fund-choices/compare-fund-performance.html

I know, I'm retiring soon, it blows my mind! Their reasoning is that they have free servicing/warranties and to be fair, I've just spent nearly a grand on my very old had forever car, but I couldn't contemplate a brand new car!

Likewise never had a lease car, nor would I want to waste money on one. When young, I bought old bangers, and put the monthly repayments I'd have paid on a lease, loan or HP into a savings account. I traded up every year or two using the money I'd saved and the PX value. Within 5 cars, I'd traded up enough to be able to buy a brand new car, which I kept for 10 years and 195k miles - I'd saved so much over those 10 years, I had enough to replace it with another brand new car twice over! Cars last an average of 13/4 years and those that are well looked after can last 20 years. It makes no sense to replace every 3 years, whether buying or leasing - it's just money down the drain.

What do you think the biggest mistake is?

I mind my business and let people make their own mistakes. No-one knows how long life will be, or what challenges they might face. Have a bloody good time at every stage.

@IpsyUpsyDaisyDoos I'm not missing any of your points. I get what you're saying. I just don't agree with you.

Someone can make all of the right choices and then end up - through terrible luck - in a position where they've got nothing.

Take my aunt, for example. She had a good job, a mortgage, savings. Never had to think about money. Then her husband got MND. He could no longer work. Then as he got worse, she could no longer work as he needed full time care. The benefits they received didn't cover the mortgage. Their house got repossessed and they had to move into rented accommodation. Their savings all disappeared. My uncle took a long time to die - that was always going to be the end - and in the course of five years, my aunt lost everything she'd built her life accumulating. Should she have made the choice not to marry in case her husband developed a rare terminal disease twenty years down the line?

And take a very good friend of mine. She was in her late thirties, married, both of them had uni degrees, great jobs, they had a mortgage that fit their income, savings, etc. Then she gave birth prematurely to a baby who was so injured during birth that she will never be able to live independently and needs 24 hour care. So my friend had to stop working to care for her daughter, again, with hardly any benefits available to replace that lost wage, and they have to spend a fortune every month on additional physio for their daughter, because the NHS only pays for one session a week and she really needs one a day. They've also had to spend all their savings and go into debt to reconfigure their house so that their wheelchair bound daughter can move around the house independently, and they have also had to pay several thousands of pounds for the wheelchair and other equipment. You'd be surprised how little help families with disabled children get for the extra costs of the practicalities of life - the NHS barely provides for them at all. So now they live off credit cards and their house is not worth what they paid for it due to the changes they've had to make to it. My friend will never be able to work again and they will always struggle. Should they not have made the choice to have a child in case this happened? Did you think about this before you had your children?

So don't tell me that there are always choices that people make to end up in the situation they're in. Sometimes, there really fucking aren't. Sometimes you get thrown a really shit hand, there's nothing you've done to deserve it, and there's nothing you could have done to prepare for it.

There are huge numbers of people in this country who would suffer the fate of my aunt and friend if illness or disaster struck and that's not because they've made bad choices. It's because there are no real safety nets to support people when life goes wrong. We all like to believe we are where we are because we've done the right things, but we're not. We've all benefited from circumstances and luck just as much as the decisions we've made, and you would do well to remember that.

@EnidSpyton

Someone can make all of the right choices and then end up - through terrible luck - in a position where they've got nothing.

Of course, there's nothing anyone can do to guarantee going through life without any bad luck. BUT that doesn't stop you making informed choices in the first place, and putting yourself in a position to be better able to withstand bad luck in later life. Statistically, very few people will make ALL the right choices and still end up with nothing due to bad luck - most people will end up doing well after making the right choices. That's the nature of statistics and probability etc. There are always exceptions, but you have to look at the majority.

Not winning the lottery is bad luck, but if you never buy a ticket, you're never going to win, however much good luck you have (unless you're a billion to one lucky and find a winning lottery ticket in the street!).

Having a child/children at a very young age when still studying, without your own home, without a job, etc., isn't "luck" - it's a choice you've made, and you have to bear the consequences of that choice. It's blatantly obvious that having a child in sixth form or university IS going to have an impact on your education and career. Yes, lots of people will be able to move on to a successful/happy life and career, but lots won't - some of that will be luck, some will be future choices.

I still think there's a question of circumstances here.

Someone having a child young is usually doing so because the circumstances they're in are not brilliant. Statistically teen pregnancy is most common in girls living in underprivileged homes where there is neglect, abuse, etc. Teen pregnancy is rarely an active choice. It's down to poor parenting, poor school attendance, lack of education and access to healthcare, etc. Many girls who become pregnant young don't even realise they are pregnant until it's too late to do anything about it. Yes there would have been a choice to have unprotected sex - but if you don't know the risks of that, or aren't fully aware of what impact it's going to have on your life, then it's not really an informed choice you're making, is it?

Some folk have objected to me using £300pm as an illustration - but it was only that. Who really needs £12M at age 57?

For someone with much less means - look at this. £50pm net from age 20 to 65. Assuming that you can beat inflation by 7% on average each year (very easy with a well diversified portfolio), then at 65 you'll have a pension fund of nearly £250K in today's money. Whilst tight, that can still be liveable for some.

Just £50pm - never increasing it.

But, at the same time, as long as they're happy with the fact they've had their three kids, great life choice for them. Maybe they could have made a different choice financially and therefore been able to buy a house, but we factored all that in when making our choices

I'm not sure why you replied with this when I said they were moaning about not being able to afford a house!

How. I am 32 and when we bought in 2019 we were on 75k combined in london which was puny. First long term jobs really as we started work life late due to living abroad/masters. I was 26, DH 29. I am 32 now and expecting our first and only child.

Our incomes didn't increase until 2022. I was on a visa so lots of lenders wouldn't even touch me without 25% deposit. I had 15% deposit, saved 20k per year living with family even when dh was on 30k (with overtime) and I was on 18k (ffs). We borrowed 4.5 times income even though barclays cut what we could borrow as I had only been in uk for 3 years (excluding time as a student). We bought a 2 bed flat in nw london zone 3. Mortgage was 1k (which helped during our low earning years) and now 1282. Service charge 150 and now 166 after 5 years (residents managed building). We have 40% equity now and it's the only reason we could have a child as our mortgage is so low.

If you live with family you should be able to buy something modest even with low incomes.

Well I guess peoples' circumstances change. Most seem to be earning £30K or under, have not been living at home (don't blame them) and are not currently with long term partners. 3 of them have moved home in the last couple of months so no long term savings yet. One of the three broke up with the co owner of their house (he paid the deposit with his inheritance).
My DD has been happily house sharing but her lease is up. She had good savings but was not mortgageable even so. A car calamity wiped much of her savings out.
A partner helps hugely with saving. It's much cheaper for two to live together as I'm sure you know. I've no idea how you saved that much on those salaries unless you paid minimal rent and living costs.

I had 15% deposit, saved 20k per year living with family even when dh was on 30k (with overtime) and I was on 18k (ffs).

How much rent did you pay?

If you live with family you should be able to buy something modest even with low incomes.

Lots of people have family who can't afford to house and feed their adult dc...

I’m older and got into a lot of debt in my early twenties through sheer stupidity and trying to live a certain unaffordable lifestyle (and this was before social media). Paying it back was tough and I learnt a lot of lessons. Now I’m mid 40s and very careful with my money.

so I don’t think it’s necessarily a generational thing, but I do think that a lot of people nowadays regardless of age, see some things as essentials when they’re definitely not (like getting your nails done) and then moaning they have no money. But perhaps they’re just at a different stage in their journey. Definitely no judgement as I was a bloody nightmare.

Tbh my MIL was on tax credits. Never earned more than 17k but did own her home.

We ate dinner together but otherwise we paid our expenses and bought groceries.
My DH had lived at home during university and then we were living abroad while he was doing his masters. We came home via surinder Singh which meant I entered uk on a 6 month visa (was allowed to work but had to reapply for permanent visa). Brexit had just been voted upon, and it took 8 months to process my visa as many Europeans rushed to apply for RCs. So we had no choice but to live with family really. Took a year really and then dh switched jobs and then was out of work for several months. By that time it was 2 years. We started looking after 2 years (when dh passed probation in new role) with 50k in savings hoping to buy a 300 to 350k flat (there were some in north finchley at that time and in st albans). We bought in a better part of finchley after 1 year of searching and being gazumped but spent close to 400k and had a lot more savings by the time it came to exchange.

We were lucky but I did quantify that it is easier to save when living with family. My friend on 25k bought a 110k flat in Coventry after living with his mum during pandemic. He had a 30k deposit. He is single.

Well said

@iamnotalemon Most of us are wise with hindsight. I wasted money on new cars, new furniture, expensive blinds, the odd over-priced holiday, etc. And I didn't start saving for my retirement until age 30. But then I saw the light (perhaps retirement looming ever closer on the horizon?) and started saving as much as I could. Maximising (and beating) the employer contribution. Paying all my bonus into my pension. Avoiding as much higher rate tax as I could. Learning to live a simple but fulfilling life that didn't require loads of money.

The great thing about that is that the lower the amount of money you can survive on, the earlier you'll be able to retire because you won't need as much of a pension pot as others.

We ate dinner together but otherwise we paid our expenses and bought groceries.

So market level rent & bills?

And I know some younger people who have said, "I want that lifestyle" and instead of putting some crap on Klarna have been motivated to start their own businesses instead and are doing really well and can afford those things themselves. One has a house deposit saved and he's still a teenager.

It depends on the person.

We were lucky to live with family. We managed to visit family in Asia twice in that 3 years (including when my grandpa died and I went for his funeral) and went for a wedding near Rome (though we couldn't afford a taxi the wedding venue and had to hitchhike to the wedding as we didn't realize wedding was on a hill) as well as a holiday in Barcelona once we had saved much of our deposit plus israel (SIL's wedding). A few weekends in the UK too including cheap weekends in St albans for private couple time (30 quid per night for premier inn!). Otherwise we lived quite modestly. No car, ate at cheaper restaurants occasionally, bought clothes on discount or second hand (still do this). We still don't have a car and dh cycles everywhere.

We started travelling and going on European weekend breaks every month once our income had jumped to 120k by 2022/2023, plus holidays to Asia. We did 2 years of this until I fell pregnant. I made sure to overpay the mortgage by at least 1000 to 1500 per month during this time so we would be less affected when we remortgaged and could afford childcare fees.

I did say you can afford to save for a deposit if you live with family and have minimal costs even on a low income. Which is what we had.

Dh's mum has a 3 bed house with box room and dh had 3 sisters. When I moved in two of them were still living there.

So not market level then...

I wouldn't disagree with you that it's easier to save if you can live at home & are subsidised. My point was not everyone has this option even if they can live at home.