Clearing debt should be priority for many

She said: “Our real challenge is how to reach those who are not financially engaged. These people may well have money, but they are not searching for help, and furthermore they are unlikely to pay for advice”

As you say, these people are not searching for help – why do you therefore automatically assume that they want any? Many (if not most) in this sector will have debts. So they would probably be best advised to reduce these. That, of course, is not really a message that the government and establishment want to hear.

Everyone should have a cash nest egg, ideally equivalent to six months’ net income, as a minimum. So for an average family salary (husband and wife) of £50,00-£60,000 this would mean £25,000 in the bank. The remaining £25,000 could be used to pay down the mortgage. This would release a better cash flow and, assuming a mortgage rate of 4 per cent, this represents a guaranteed no risk return several orders of magnitude greater than they could get from cash savings and, in the current economic climate, probably from equity investing as well. This is equivalent to a gross return of 5 per cent for a basic rate taxpayer.

Harry Katz

Consultant,

HA7 Consulting,

Stanmore,

Middx