InvestmentsApr 25 2014

Poor financial education will hit incomes: Lovatt

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The product director for building society Scottish Friendly said people had started to adopt a “postwar emphasis” on saving and paying down debt and many had to work to a tight budget.

Mr Lovatt said that with the average person in the UK left with just £148 from his salary after all monthly bills had been paid, people were living on approximately £5 a day.

Looking at the society’s new disposable income index, which charts the saving and debt repayment patterns across the UK, 75 per cent of people said they feared their financial situation would deteriorate, although they were aware of the need to save for retirement or for a rainy day.

Mr Lovatt said: “The emphasis on pensions is misguided and more can and should be done to encourage better understanding of the options available to savers.

“When you are only putting small amounts of money aside each month, it is even more important you make it work harder for you.”

The situation is worse in some parts of the country than others, according to the index. While the south-west has the greatest proportion of people saving or investing each month, on average they contribute the least, at just £66 a month.

The biggest individual savers are in Yorkshire and the East Midlands, who put aside an average of £75 each month. People in Northern Ireland, though, only have an average of £125 left each month to work with.

Mr Lovatt said much of the inability to save was a result of people being uneducated about financial matters. For example, he said, two-thirds of people had little knowledge about Isas, adding: “When we are dealing with an accessible and flexible form of tax-efficient saving, this lack of knowledge is concerning.”

IFA view

Kevin White, head of UK financial planning at international advisory firm deVere Group, said financial education was critical from the earliest possible years. He said: “Financially speaking, the world has changed in recent years, and it is continuing to evolve at an incredible rate. It would be a massive disservice not to teach children about money.”


Region

Average monthly disposable Income

Scotland

£160

North East

£155

West Midlands

£153

London

£152

Yorkshire and Humberside

£152

East Midlands

£150

NATIONAL AVERAGE

£148

East Anglia

£144

South-east

£144

North-west

£142

South-west

£139

Wales

£136

Northern Ireland

£124

Source: Scottish Friendly

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