Brits must start saving to protect themselves against a huge 64% rise in the cost of living over the next 20 years, according to a wealth management consultancy firm.
Recently, we wrote about how changing attitudes towards inheritance are forcing younger Brits to adopt a new culture of financial independence. And evidently, there’s no time to feel sorry for ourselves.
The new interactive “Cost of Life” infographic commissioned by Geneva-based Liberty Wealth Management shows how costs will rise to daunting levels if the average inflation rate of 2.5% continues.
The quirky graphic, based upon the classic Game of Life board game, maps the road along the largest expenses that Brits tend to encounter, including marriage, buying a home, a family holiday, and raising a child. It then assesses how much these costs will rise every five years for the next two decades.
The average cost of progressing through university will increase from £88,700 to £145,000, it predicts, while the average cost of raising a child to the age of 21 will increase from £222,458 to £364,523.
The graphic is designed as a reminder of the importance of saving, with an estimated 15 million Brits currently thought to be putting away nothing at all for the future.
The average property will cost over £265K in 2033, the graphic suggests, and that’s assuming inflation of just 2.5%.
Tough Time for Savers
There is no mistaking that this is a difficult time for savers. The cost of living is rising faster than wages, while the returns on savings accounts remain very poor. The average easy-access savings account currently returns just 0.67%, as the Government’s Funding for Lending Scheme continues to prove detrimental to savers.
A few tax-free ISAs from the Leeds and Skipton Building Societies stand above the current rate of inflation – offering 3.05% and 3.00% respectively – but savers will need to lock away their funds for the next few years to achieve that kind of return. (Find out more about ISAs in our Guides section)
There’s even a credible case now to suggest that current accounts, which pay up to 5% interest in the first year, are the better option for savings. And with the launch of the new 7-day current account switching system, there’s never been a better time to switch banks and take advantage.
But ignoring the need to save is not an option, according to Liberty Wealth Management. Founder Iain Macritchie says that keeping up with saving is the best way to prepare for the shock of rising costs ahead.
We’re very pleased to have produced some research which highlights the importance of putting some money away for a rainy day. We really hope the new Cost of Life infographic prompts people to start saving now, considering their needs in the future.
Iain Macritchie, Liberty Wealth Management