SMUG MONEY: Why there’s no such thing as normal

Written by Rebecca O'Connor on 11th Jan 2017

Older people had more money last year; working people had less. The gap between the poorest and the richest closed, but only because the poorest are older retirees who enjoyed greater pension income… and after reading the most recent Office for National Statistics stats on income inequality in the UK yesterday, was I the only one left absolutely no clearer about who is and isn’t better off in real terms?

More superficially-interesting-but-impossible-to-apply-to-the-real-world statistics came recently in the form of research from Charter Savings Bank, which found that millennials (those aged 18 to 34) saved more in 2016 than any other generation last year.

On average, millennials saved a total of £3,701 in 2016 – over £450 more than their baby boomer and Generation X counterparts, who saved £3,226 and £3,238 respectively, according to the bank.

This finding was somewhat surprising, given that all year, release after release came in about how difficult it is for millennials, on such relatively low incomes compared with the cost of living,  to save, buy anything or even get out of bed.

I’d always dimly suspected that millennials, with their well-maintained hair and footwear and penchants for exotic getaways and street food, were actually rolling in disposable income but just spending it so fast they never really realised how well off they were.

So this Charter Savings Bank research did make me wonder whether it’s not that they don’t have money, it’s rather, that they choose to spend it, but last year, might have begun to realise this is not such a good idea.

As quickly as I was forming this conclusion, it was being squashed by some Giff Gaff research, directly contradicting the research from Charter Savings Bank, informing me that millennials are being forced to work into their late seventies due to a lack of savings.

Its research showed that the average millennial can only save around £103 a month, and 49% of them can’t even afford to pay into a pension scheme.

… Huh? Which is it? Stony broke or saving like squirrels?

The problem with such research and the reason it can produce such different findings with the same cohort is that in reality, our finances are as unique as our fingerprints.

Who are “they” anyway? The 18 to 34 age group spans people who haven’t even started uni yet to those with two kids, a whacking great first mortgage and even scarier childcare bills. It covers people on low wages, unemployed people, long term students, trainee doctors and lawyers, fully qualified doctors and lawyers, people who studied abroad, people with rich parents, people with poor parents, people who live in Scarborough, people who star in Made in Chelsea, people who like spending money on restaurants, people who like spending money on clothes…  you get the point.

I don’t think that the research is totally unhelpful, but it is hard for it to reach a level of granularity where it would actually become meaningful, because of the diversity of our backgrounds, incomes, debt levels, spending patterns, geography and social milieu.

This is true at any age, not just millennials. For example, on the face of it, I have lots in common with my closest friends, education, interests, geography… but if we put spreadsheets of our finances side by side they would reveal HUGE differences. Some of us took out full student loans, others didn’t. Some travelled, others didn’t. Some had kids at 30 (me), others at 35. Some work full-time, others don’t work at all any more. Some get free childcare from parents, others pay £900 a month for it.

There are some macro challenges we all face: the cost of home ownership, difficulty saving enough for a decent retirement, student fees, etc. We did the below vlog on why it sucks, economically, to be in your thirties now:

The micro differences between our finances have arguably grown over time, as financial services itself has become more complicated, innovation has produced more products for us to buy (they didn’t have pet insurance in 1953) and our spending has become more diverse as a result of the growth of consumerism and technology. In post-war Britain, it is possible that it was easier to divide people into distinct socio-economic groups. The blurring of these may be considered a good thing, but not if you are really trying to work out if we are better off or even harder, identify the best policies to suit everyone.

The truth is that the stats tell us very little about how people are really doing financially, in this infinite matrix of luck and judgment, good and bad. Headline figures are useful trend indicators, but am I really meant to relate to a piece that tells me I should be feeling better off because the average household had £600 spare last year that they didn’t have the year before? I don’t relate to that at all. It even gets my back up a bit, in an adolescent sort of way: “you don’t know me, you don’t know anything about my life”, I want to cry out.

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It is such a shame that proper, personalised financial advice has become such a rarefied thing in recent years. Good financial advisers are among the few individuals who understand the unique nature of everyone’s finances. What a pity that advice is in itself a casualty of wealth inequality, with only the very richest in society being able to afford it (or eligible for it, in a world where only those with a net worth of circa £100,000 are considered worth an adviser opening a file).

There’s no such thing as normal when it comes to money. So if, like me, you read those stories about “the average working household being £600 better off” and think “not here it’s not”, don’t doubt yourself or feel like you might be doing something wrong. Just set to work understanding your own unique financial footprint and how you might like to improve it. No one knows your money like you. And that’s 100% true.

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