James Coney  

We are redistributing debt

James Coney

James Coney

One of the great perceived injustices of personal finance is the regular cry that baby boomers are so much better off than 20-somethings.

Well of course they blooming are.

This is not a sign of some kind of intergenerational injustice, it is just that they have been saving for 50 more years. They are bound to have had more pay rises, more chances to save, more time for compound growth, more days to realise the error of their ways.

Equally foolish is this idea that somehow every property bought by a landlord deprives a first-time buyer of a home. 

And one of the mistakes we (by which I also mean journalists) often make is to compare generations too quickly.

My mother forever bemoans the number of holidays young people take, as a sign of generation X’s fecklessness.

But she fails to add into the equation that when she was young, easy, low cost international travel just was not possible. The irony is, of course, that for now it is no longer possible.

Intergenerational comparisons are largely fruitless. But I was rather intrigued by the bulky piece of research that Columbia Threadneedle issued into differences in age with finances.

For a while now I have been worrying about the under 30s, who leave education into a highly consumerist world, encouraged to spend on credit at the drop of a hat.

Student debt, and the sheer scale of it, desensitise people to borrowing.

The number most striking for me in Columbia Threadneedle’s report was just how many 18 to 24-year-olds admitted that they wished they had looked after their money differently before the Covid-19 crisis. It has proved an early eye-opener.

The research found that more than half of this generation cited living for the moment as a financial priority.

You may say that ’twas ever thus, but rather starkly a large proportion of those surveyed expected an inheritance, when in reality only one in three ever received one.

And this, finally, is my point. That while debt has become normal for a younger generation, more than any before, the idea of being asset rich has become normal for the older generation.

Inheritance planning is going to be become an increasingly vital part of ensuring that we have a sensible spreading of wealth down the generations. 

The issue is how you can go about untapping some of that money, particularly when it is tied up in property, so that older people can see their money passed down.

The answer you always come to is equity release.

I am not saying it does not have its place, but when you view it in context of these societal changes, then all it looks like is debt transference, with an older generation willing to take on the burden for a younger generation.