Can I have it now please?

A recent survey has shown that 20% of our adult children are asking their parents for their inheritance now, rather than when their mum and dad depart this mortal coil.
Financial pressures are mounting and according to the research, carried out by Skipton, nearly 20% of under 35s have received £50,000 from their parents, with 10% benefitting to the tune of more than £100,000.

So what do you think? If you are a parent are you prepared to compromise your lifestyle today to help your kids deal with the fact that they can’t get a mortgage or pay off their student debt? Or is it presumptuous in the extreme of your kids to be looking for this money now and, in fact, do you think their lucky to be getting anything at all when you die because, after all, you started with nothing

And children? Do you think your parents have a duty to help you out if you’re struggling since they brought you into this world? Should they adjust their coat according to their cloth so that you can pay off your debt and buy a house?

And anyway, they might save some tax if they give you the money now!

Let us know what you think!

Paying Regular Bills From Irregular Income – Some Thoughts.

In Rachel’s last diary blog she talked of the difficulties in budgeting to pay her bills from an income that comes and goes. We asked Nicola Jackson, Chair of the Glasgow Branch of the Institute of Financial Planning, and a Chartered Financial Planner, to comment on Rachel’s issues.

I think that Rachel has made an excellent start when it comes to thinking about her budgeting and is most definitely heading in the right direction. Trying to cope with regular payments out when payments in are irregular is not easy!

If I was advising Rachel I would suggest she breaks her main expenditure down into two categories as follows:

Fixed and Personal Expenditure

Those payments which come out of her bank account each month and which have to be paid in order for Rachel to live her life. She has rightly started to do this by looking at her mortgage, bills, petrol etc. but I would also ensure she has added food and basic socialising into this budget. If she doesn’t take this into account then she is always going to be behind and susceptible to borrowing or overspending so I think that this Fixed Expenditure Budget list needs careful and honest consideration. She needs to ensure that whatever she has left over in the months where income is higher are not squandered and are available to plug the gaps for the months when income has reduced. This involves accurate budgeting as described in the article
here

Music Development

This would be any costs associated with growing her business. She has rightly started to forecast this and this is her next budget in order of priority. She needs to spend this money to speculate to increase her income but I would also suggest she looks into ways in which she could subsidise these costs, perhaps with grants or joint ventures. I appreciate that this might compromise her output so if she doesn’t want to do this then she needs to work out how much teaching, for example, she needs to do to cover her Fixed Expenditure Budget and then her Music Development Budget.

Of course this then raises the issue of time and Rachel needs to leave herself enough ‘time’ to do the development work she needs whilst earning the money from teaching and gigging to provide for her two main priority budgets.

It is important that Rachel sets herself time related goals. She needs to have achieved ‘x’ by a certain point in time. This will then help her focus on budgeting to a time frame. This will in turn enable her to signpost her own development and progress in writing her new album and ensuring that funds she has made allowances for in her budget are not exhausted by her project drifting. I would have a visible wall planner where she works and plot her signposts onto this so that she can always keep track of where she is against schedule and budget.

This should help Rachel focus on those important items she wants to achieve.

Why is retirement such a lottery?

Pensions have been big news over the last few weeks with the harbingers of doom and gloom delighting in reporting that we’re all set for a debt laden and miserable retirement. Firstly we had announcements that contributions were to be increased to pensions in the public sector, and that these pensions might be lower and paid later in life.

Then John McFall, now Lord McFall to give him his proper title, unveiled his Workplace Retirement Income Commission Report in which he said that even Einstein wouldn’t be able to understand the complexity of the UK private sector pension market!

A combination of high charges, opaque products and ever-changing pension rules has turned the vast majority of consumers away from pensions and Lord McFall reckons that up to 14 million people in the UK may be making no pension provision at all.

It’s a huge problem, and made worse by the fact that many family budgets are stretched in so many ways these days that even if people were engaging with the thought of retirement it’s difficult to know where the money would come from to make adequate provision.

So we’d like your help with our own pension report. What do you think stops people thinking properly about making sure they have enough money put aside for the day they stop work:

Is it because it’s too far away and you don’t want to think about it?

Is it because you don’t understand pensions and how they work?

Is it because you think you’ll find money some other way?

Is it because you’ve no money to invest anyway?

And what part do you think you, your employer and the Government should be playing to help you fund your retirement:

It’s the Government’s responsibility and we should all have much better State Pensions?

It’s up to our employers to make sure we all contribute to a pension?

Pensions should be compulsory for everyone in work?

It’s my retirement and it’s up to me to make sure I’ve organised it properly?

Please take a couple of minutes and add your thoughts below.

Nostalgia ain’t what it used to be

My mum turned 80 last week and one of her birthday cards listed the price of everyday goods the year she was born – 1931. It made fascinating reading:

Petrol – 7p a gallon

6 Eggs – 3p

Pint Guinness – 4p

Post letter – 0.5p

1/2lb bacon – 6p

Depending on which survey you read the average income in 1931 was between £100 and £150 per annum, so let’s take an average of the two at £125. So your annual income in 1931 could buy you 25,000 eggs at 3p per half dozen.*

Today 6 eggs can cost £1.50 and the annual average salary is around £23,000 so you could buy 92,000 eggs.*


In 1931 you could buy 14 gallons of petrol with every pound you had, or 1750 gallons if you spent all of your salary filling up your car, for those who had a car in 1931 that is! Today at an average of £6 per gallon you could buy 3833 gallons!*

In 1975 when I started my first job on leaving school I was paid £16 per week and a pint in the student union was 19p so I could drink around 80 pints per week. Today the average salary is £442 per week and although a pint can cost as much as £5 depending on where you drink it you could still buy 88 pints with your £442, an increase of 10% over 1975 consumption.

So although it looks as though we’re much better off today it never really seems that was and figures are strange things since in 1931 you could get 200 eggs for £1 but today you’ll be lucky to get 4! !n 1931 you could buy 14 gallons of fuel with £1 but today you’ll need £6 to buy one gallon! And although I could get 5 pints for £1 in 1975 today I might need £5 to get 1 pint!

I asked some Moneysucks readers what they earned in their first job and what they did with their first pay. The answers were interesting:

A month’s rental of a Sony C7 betamax VCR. Can’t recall the cost…think it was about £19. Didn’t leave me with much left over!

First weeks pay was £18.25p i worked in Glasgow and I lived in Rothesay so the majority of that went on the following weeks travel expenses oh and i gave £2.00 to the miners at the cenbtral who were striking. lol well it was 1985

‎100 franc (£10) a week for my summer job on a French camp site when I was a student. Spent it on gauloises.

Got £400(for two months work, just started in bank) – first thing I did was give met mum 200 quid! Still couldn’t spend the rest

I did my first day’s work aged 9, no kidding, knocking out the inside of an old butchers shop in Lanark…and didn’t get paid. Family Business of course

I got my pocket picked and lost the lot!

How much did you earn from your first job and what did you do with it? And do you think your money goes further now than it did then?

*All of these figures are ‘rounded-up and ignore the effect of tax, NI and all the other things that we have to spend our money on, both in 1931 and today but you get the point!

Paying Regular Bills From an Irregular Income

Our travelling musician Rachel Hair has sent us her latest post from a ferry on the Irish Sea while on her way to another far-flung gig. In this one she tells us of the difficulty budgeting to pay regular bills, never mind funding the cost or producing a new album, when her income is so irregular.

Let us know what you think Rachel should do, or tell us if you have similar issues, before we call in our experts to offer their advice!

“As a self-employed musician and teacher every day, week, month is different. Some days I can have no work, others I can be away on tour, or have back to back teaching and rehearsals.

A result of this is that my monthly income fluctuates all the time. There’s usually one month of the year when work and earnings are low. This year it happened to be March. I’d had a tour cancelled, so as a result had little performing work and just had to rely on my teaching to get me by. I’m quite lucky in that my week to week private tuition can cover all my outgoings (mortgage, bills, petrol etc) but it doesn’t leave much for anything else else and at times pupils can cancel lessons, which is frustrating to my bank account!

In order to budget for things I have to look at what my bookings are for the months in advance. Every now and then I have a crisis of confidence and sit down with the diary and calculator to work out how much I’m going to earn in the following months. Right now I’m saving for my trio to record a new album. It’s a very expensive business as I’m a self-releasing artist so have to pay everything from the recording, mixing and mastering to the physical production of the cds, marketing and mail costs to distributers.

At the end of spring I sat down and worked out how much I could earn before November to see if I would be able to pay for the album. This involved calculating all my direct debits that go out of my bank account and then working out how much my gigs and teaching would bring in over the next few months. It’s worked out ok, though I am having to be careful about my outgoings…no summer Caribbean holidays this year!

I now know (I know I should have worked out earlier) exactly what my minimum outgoings are per month which is making life a lot easier for saving for the album.

Managing money can be a challenge, but it’s something that just has to be done. I’m finding now that I have to sit down every few months to check that I have enough work coming in. If I see there’s a couple of weeks with not many gigs, I know I have to be careful that month, and make sure I have enough money in my account to cover my outgoings.”

Top ten holiday money tips

As the holiday season starts to kick in, although you wouldn’t know it if you were caught in thunder and lightning storms all over the UK at the weekend, here are our top ten tips to make sure you don’t suffer any unexpected financial storms while you’re away!


 Don’t wait until the last minute to change money – airport travel shops don’t always offer competitive rates.

 Buy your travel insurance as soon as you arrange your holiday, and read the terms and conditions and exclusions and limits of the policy you are buying.

 Check the cost of using your mobile while you are abroad. Buy a local sim card if you are going to be making local calls while you are away.

 Don’t get fooled into thinking that the headline price is what you will pay for your flight. You’ll have to add on bags, taxes, priority boarding and credit card fees.

 Remember that you have different levels of protection depending on whether you arrange all of your holiday components yourself or do it all as a package with a travel agent.

 Using a credit card for holidays costing between £100 and £30,000 means that you have added protection if the holiday company or airline goes bust.

 Buy goods in the local currency in shops.

 Make sure your Bank knows you are away and likely to use cards abroad.

 Check the cost of using your credit card abroad.

 Pay extra to cover the excess if you are hiring a car.

Have a great holiday!

Who do you trust?

How easy is it to know what you’re buying? For example, you’re reading the exclusions on your new critical illness policy and you come across this gem. “Your policy doesn’t cover non-invasive cancers in-situ.” What does that mean when it’s at home?
Well it’s basically a not very serious cancer that’s only in one place in your body and unlikely to spread! And because of that it’s unlikely to kill you and it’s definitely not likely to trigger a pay-out on your critical illness policy.
But it’s also very unlikely that you would have been given that information at the point of taking out the policy. You would have been told that your policy covered ‘Critical Illnesses like cancer, heart attack and stroke.’
If you were very lucky you might have been told about some of the other illnesses covered by your policy, but not which particular ‘types’ of each individual illness would trigger a claim and, more importantly perhaps, which would be excluded. For that you would have to read the policy terms and conditions.
But even then would you be any better off?
For as well as reading about ‘non-invasive cancers’ you can also get your head round ‘surgery requiring sternotomy’, ‘characteristic electrocardiographic changes’ and ‘histologically classified as having a Gleason score of 6’. Even my spellcheck didn’t recognise some of that!
Now I know it’s maybe a bit unfair to single out critical illness cover for criticism when you would expect some medical terms to be necessary. But I could have the same conversation about every other type of insurance.
And it’s one of the main reasons that there’s still such a lack of trust in financial service organisations in the UK. Consumers buy policies in good faith and become angry and frustrated when their claims, that again are made in good faith, are turned down.
And unfortunately the result of that lack of trust is that lots of us do without cover and remain exposed to accident and illness to property and person because we don’t really understand what we’re being asked to buy, and we don’t really believe that our claims will be paid out when we make them anyway!
There must be a better way? Drop us a line and let us know which terms you don’t understand, and which companies you might trust a bit more if they communicated with you in a clearer and easier to understand way.

Pensions – ignore them at your peril

It’s time to raise pensions again as a new report just out suggests that 20% of the people surveyed are making to provision at all for their retirement and that pension savings in the UK are lower than they are in France Germany and Spain. In fact another survey I saw today suggests that they are higher in China and Mongolia than they are in the UK.

Pensions are boring, and a dirty word to many of us. We have little interest in them, partly because we have no love for the companies that market and sell them and the opaque and vague ways that are used to describe their workings, and partly because we don’t like to think that we’ll be too old to work one day and we’ll need some sort of replacement income!

But we will – on both counts! We’ll get fed up working and we’ll need an income. Some of it might come from the State but God only knows how much that will be in relation to the total that you are likely to need.

The rest could come from a variety of sources – savings, the proceeds of the sale of a family home as you downsize, an inheritance, the sale of a business or a lucky punt on the two-thirty at Newmarket. Some of it might even be called ‘a pension’.

Where it’s going to come from doesn’t really matter! If you can sit down and calculate when you’re going to have at the time that you stop work, and it’s enough to give you a living income to do the things you want to do then fine!

But if you don’t know where it’s going to come from then the thing they call a pension is not a bad thing to have – and the sooner you start to put some money into it the easier you are going to make it on yourself in later life.

Forget all the technical talk about pensions.

It’s a savings scheme that gives you tax relief when you invest money, allows your money to grow in a tax-free fund, and then lets you take an income when you get to 55. Okay, the income is taxed but under current rules you can take 25% of the fund you have built up as a tax-free lump sum.

And if you don’t like the idea of a pension because you don’t like ‘risk’, then keep your money in cash. The decision to invest in a pension is about tax. The decision about where to invest once you are in a pension is about risk. You can keep all of your fund in cash, or use all of it to buy shares in a small Japanese gold production company! It’s up to you.

Whatever you do, look at the consequences of not making any provision for the future. That’s all we ask.

Ill, but still in need of an income?

If money is tight these days when you are working imagine how you would cope if you are off sick for a prolonged period of time?

If you are self-employed your income will probably stop as soon as you stop working when you are ill or following an accident. Even if you are employed your employer may only continue to pay for the first few weeks of absence.

Although there are still some State benefits available they are becoming more difficult to claim and will not replace all of your income. This is where Income Protection, or Permanent Health Insurance as it used to be called, can help. This type of insurance is designed to replace your salary until you are able to go back to work.

The first thing to decide is how long you can wait before any benefit starts. If, for example, you get six months full pay and six months half pay from your employer you could afford to wait for a year before most of your benefit starts. If, on the other hand, you were not paid at all if you were off sick you would need benefit to start straight away – although most policies have a waiting, or ‘deferred’, period of at least four weeks.

The longer you wait before benefits start, the less the policy will cost you. Other factors which influence the amount you pay include your age and sex – women are likely to pay substantially higher premiums than men since most companies have seen more claims from women (although this may change soon in line with a European Court ruling on equalisation).

Your occupation will obviously be a factor as well. A concert pianist is likely to be harder to insure than an accountant!

Insurance companies will not allow you to insure all of your income. A sore back is difficult to diagnose and is unlikely to get better if someone is paying you all of your salary to sit at home. Somewhere between 50% and 65% of income is normal, although different companies have different definitions of income. Some will allow you to count overtime or bonuses, others won’t.

As with all insurance you should check the small print before you sign anything. Companies define disability in different ways. Some will pay out if you are unable to do your own job – other will only pay if you are unable to do ANY job. Obviously an ‘own’ occupation definition is better, although for some occupations such as a surgeon or a pianist difficult to come by.

Insurance companies will want to see your full health history. If you think something is relevant then you should tell them. It’s pointless paying premiums for years only to discover that your claim is refused because you forgot to tell them something when you completed the application form.

What does the future hold for our teenagers?

According to a new report from Royal Bank of Scotland there is a large gap between where today’s teenagers expect to be in the near future and where the current reality suggests they will actually be.

Over 50% of the respondents, who were all aged between 12 and 19, said that they would own a house by the time they were 25 when the current reality is that the average age of a first time buyer today is 31.

Here are some of the other headline results from the survey, carried out annually by the MoneySense Research Panel for the Bank:

70% expect to buy a car by 21
87% expect to have left home by 25
46% need more money to be happy

On top of this the report suggests that more young people are worrying about their money today and would consider £1,000 to £5,000 to be ‘a lot of debt’ and 84% believing that it is important to save.

As well as high expectations of early housed purchase the average salary expected at age 34 is £61,700 – significantly higher than today’s average salaries.

The survey has been produced annually now since 2007 and this year’s report has shown some interesting developments. In 2007 20% of those questioned said that they did not keep track of their money but this year this figure had dropped to 10%. That this may be a reflection of the time in which we lives is reflected in the fact that that average amount of money received by those questioned has fallen from £127 per month in 2008 to £88 in 2010, and during the same time period the average amount saved fell from £143.17 to £124.30.

The Report provides a fascinating insight into the spending habits and aspirations of today’s teenagers and includes sections on expected salaries, attitude to debt and financial aspirations.

It is part of a five year independent research study commissioned by RBS to assess the attitudes to money of 12-19 year olds in the UK and the report concludes that “throughout all this the need for financial education is clear. Young people continue to express a desire to learn, to save and to talk to adults at home as well as teachers and experts at school. The RBS Group will continue its 17 year programme of investing in financial education and remains committed to continually improving the MoneySense for Schools programme year-on-year.”

Moneysucks? has always maintained that we need to begin the process of educating people in the best ways to use money, and to ensure that we can control our money rather than letting it control us, as early as possible and it is great to see that RBSD, much maligned recently, is continuing, and in fact expanding, its programme of investing in financial education in our schools.

It’s a programme that will need to be expanded further if some of the respondents to this latest report are not going to be sorely disappointed in the future!

To view the full report click here

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