The Good News and Bad News about Life Expectancy!
With life expectancy predicted to reach 90 years by 2050, ensuring young people have a considered approach to financial planning is paramount.
The good news is we’re all living longer – hopefully! Worldwide studies have shown that around every ten years, life expectancy increases by two to three years – mainly because of better health, better diets and advances in medical science. If this trend continues, by 2050 average life expectancy will be as high as 90 years.
The bad news is we’re not saving enough for our future and much of the reason behind this is poor levels of financial understanding and education.
An OECD (Organisation for Economic Co-operation and Development) study in 2012 tested individuals from 14 different countries on their levels of financial knowledge. The results revealed that out of eight questions, no single country had more than 70% of its population answering at least six correctly.
Will improved financial literacy really improve long term financial planning?
With young people in 2014 facing the possibility of more than 30 years’ worth of retirement potentially supporting two or possibly three generations above them, as well as their own children, setting aside money for the future has never been more important.
Where can young people learn these skills?
Recognising the long term benefits of financial literacy, several countries have put in place financial education initiatives. Financial literacy is being added to the National Curriculum in UK schools in September and in Saudi Arabia, the elements of good financial behaviour are already being taught in schools and universities. But, it’s never too early to begin instilling a culture of saving and parents can play an important role in establishing a positive attitude.
- Pocket money: Encourage children to save up for what they want to buy. Give them regular pocket money and incentivise them to earn extra by undertaking tasks such as helping with the housework, tidying their bedroom or washing the car.
- Open a savings account: When your children are young, think about opening a savings account for them and contributing to it on a regular basis. If your children receive money from friends or relatives for their birthdays, add this money to their account.
Explain the cost of debt: Not all debt is necessarily bad – most people will need a mortgage to buy a property which can be considered as a long term (and real) asset but some debt, such as credit or store cards, can be costly and hard to eliminate.
- Teach budgeting: When children leave home, they will have to manage their own family budget. Getting them to think about budgeting from an early age will set them in good stead for the future.
- Encourage pension saving: The GCC countries offer generous public pensions but having a personal pension pot to top up state subsidies is wise as these benefits are subject to change.
For many parents coaching their children in money matters is a challenge as they themselves don’t have the necessary skills but, help is at hand.
Saving money is neither an art nor a science; rather it is somewhere in between and to do it successfully requires both dedication and hard work. Encouraging a culture of saving in young people is the responsibility both of parents and the education system, with parents providing the “art” and schools and universities taking care of the “science.” By working together, young people will be able to tackle money management with much greater confidence ensuring that no matter how long their retirement, their money will go the distance.