We are all in the red. The Office for National Statistics says that for the first time ever (well, since it started collecting figures in 1987), more UK households are borrowers than savers. The ONS also says that savings levels are at their lowest since 1963.
Debt can be a good thing. An increase in first-time buyer mortgages – in February at the highest level since 2007 – must be good news. The typical first-time buyer isnow 30 and has a gross household income of £41,000: so, hardly foolhardy young people taking out mortgages they cannot afford, but ones sensibly getting on the housing ladder rather than lining a landlord’s pockets.
But how about borrowing at the other end of the age spectrum? The Equity Release Council says that lending to older households has more than doubled in two years to £870m in the first quarter of this year. Every day, nearly £10m of equity was withdrawn by householders aged 55 plus.
Equity release has of course changed and improved much over the last few years thanks to the drawdown option. But it is still borrowing and it needs to be repaid – with interest added – eventually. There are checks and balances in place these days, so hopefully no one finds out their inheritance has been affected once their relative has died.
I expect that only a few of those taking out equity release are splurging the money on round-the-world trips or racehorses – and if they are, well, that is their choice, isn’t it?
I imagine many are using the cash to pay for home repairs and other necessary items: just the kinds of things the retired used to use their savings for. After 10 years of low interest rates, saving for a rainy day has been a wet blanket: that is why red is the new black in the UK.
No time to get emotional
That the world is in turmoil is hardly news. Horrific attacks in Syria; trade rows between the US and China and the John Le Carre-worthy spy poisoning in Salisbury: it is all kicking off. So, as ever, investors’ thoughts turn to gold.
And again we all trot out the safe harbour line – that gold, as a finite resource, will always have a value while currency, property and shares could become worthless. An ounce of the yellow stuff cost around £934 last week – still a way off its highest-ever price in the summer of 2011.
Online I found an interview with a US expert on CNBC who made lots of good points about the gold price. Hecalls gold “a very emotional commodity”. And if there is one thing surely designed to derail an investment, it is letting emotions get in the way.
Back in the last century, my (late) father put money in a fund invested solely in Belgian stocks on the back of emotional links to his distant ancestors. Of course, he lost loads of money (and the fund does not exist any longer, unsurprisingly).
Caught in a wave of excitement over the UK Olympics, I reasoned that Rio would be similarly amazing: and so put money in a Brazilian fund. Yes, that lost me money and yes, the fund no longer exists.
Letting your emotions drive your investments is not a good idea – and surely this is true of gold as much as anything else. Perhaps it is time to be a cold fish, not a goldfish?
Don’t get small changed on mental arithmetic
Financial education in schools is a favourite soap box for money writers: just as it should be. But while there is some financial education in schools now, perhaps the problem is not with younger people.
Research from the UCL Institute of Education and the University of Cambridge found that a third of adults in England and Northern Ireland cannot work out the correct change from a shopping trip.
Four in 10 cannot work out a simple discount on a shopping item and half are befuddled by a line graph.
Personally, I find mental arithmetic when shopping a good way of keeping the remaining grey cells active. I can do complicated equations in my head to work out whether huge packets of toilet rolls/cat food are actually cheaper than smaller ones (looking at the small print giving the price per sheet or 100g on the shelf labels is cheating).
What I cannot do is remember to pick up the change from the self-service machine. That is when the younger generation in the shape of a 12-year-old, keen for cash to splurge on football stickers, comes in handy.
Charlotte Beugge is a freelance journalist
