Monday 13 October 2014

Beyond their means

 Hello  Frugellers
And Welcome  to Deb and the Pensive Pensioner on the follower bar and Jane on bloglovin

I take the Independent on Sunday each week. The finance section usually does a "Health Check" on someone who wants advice to sort out their finances, usually for a particular reason, such as saving for a house, world tour, children etc.
This weeks "patient" was a woman who wanted to clear her debts and focus on being able to provide financial support for her family. This 46 year old single mum with two dependent children  ( aged 20 and 16) earning £18,000 p.a owed £14,000 personal bank loan; £6,000 overdraft; £7.000 credit card and £1,500 on a post office card. The cards were both on 0% deals, due to end  on March 2015. She bought her house in 2001 for £42,000 on a repayment mortgage which she had remortgaged to get some work done., her outstanding loan now standing at £77,000 Unsurprisingly she has no savings to fall back on.
The reason for the health check.. "Once I have paid off my mortgage, I'd then like to help my children take their first steps on the property ladder"
WHAT!?!?
How does this woman sleep at night? What circles does she move in that have inspired her to believe she is in a position to help her children to get on the property ladder and what example is he setting these young people anyway? If she concentrates on just paying  off her cards/overdraft, cutting up her cards and living very frugally, it will be well over  ten years before she is out of debt, when her children will be over 30.
I've been thinking about this woman ever since I read the article yesterday.
Am I in a minority believing that children should be taught the value of money and encouraged to pay their own way as much as possible. If they are in full-time education there are always paper rounds etc. ( e.g my youngest granddaughter used to do washing up in a local resteraunt when she was 14 to make a bit of money, my eldest did a paper round from 14 to age 17 when she started work)
 Just before I retired I asked a colleague why she wasn't retiring yet as she was older than I? She told me that she wouldn't be able to retire for another four years as she was paying her grandchildren's university fees so that they had no debt when they qualified. Her worry was that she was not made redundant before this date. I'm trying to imagine my daughters "allowing" me to work beyond retirement age because of their children.
I know it's horses for courses and some of you might think I'm harsh and judgemental but I'd still like to hear your views anyway
Gillx



38 comments:

  1. I agree that lady should get her priorities right and concentrate on her debts first, however most house prices these days are way beyond what the youngsters can afford and they cannot even get a mortgage on the salaries they earn. The banks etc want £30000+ deposit which would take forever to save up for without some help. If they go to university and leave with £27000 tuition fees debt, this is taken into account when their mortgage capabilities are calculated. When we were younger, yes we had to scrape together a deposit but house prices were not so expensive pro rata and we were not straddled with extra debt like university fees. That is why so many parents (us included) have helped the kids out as best we can xxx

    ReplyDelete
    Replies
    1. If you can afford it why not?! I am sure that my eldest daughter will pay her daughter's Uni fees and buy her a house when the time comes. My other younger daughter ( a single parent with children 20 and left home and 22 and still at home) only just keeps her own head above water and, if she wasn't careful, could so be like the woman in the article. Unless she marries a rich bloke or gets an humungous rise will never be able to help them towards a house. Nor would they want her to in her circumstances. and she certainly wouldn't want me to retire later to help them out. The reality is that house buying is not for everyone, nor should it be as that would be unsustainable.
      Gillx

      Delete
  2. Of course you help your children out if you can afford to but it should not be expected. I agree with you that children should be encouraged to make their own way as much as possible. My son was collecting supermarket trollies and stocking shelves on a Saturday from the age of 14. We supported him through college while he still worked at weekends in a sports store. He took his degree part time (whilst working in IT full time) and is now living in Australia with a new wife and super well paid job. My daughter who was the youngest did an Avon round from the age of 14 ( I used to follow her around to ensure she was safe at all times). She took a YTS office job and now works in accounts and is adding to her qualifications bit by bit. She has quite a senior post and never wanted to go to Uni. I just never got the chance to go. My parents were not that well off. I see so many parents struggling to get their children through Uni only for them to end up in debt with no job at the end. Is that really the way to go?

    OK, I'll get off my soapbox now ! :-)

    ReplyDelete
    Replies
    1. No need. This is a very soap-boxy post. As you say it is what you can afford and the woman in the article can't afford to help her children out. My granddaughter is now doing an apprenticeship as she doesn't want to be in debt and hopefully she will work her way up to a good job (mind you she would really like to be a firefighter!)

      Delete
  3. Gosh...where to start. That poor woman isn't living in the real world. She needs to take care of ALL of her own debts before she starts worrying about helping her children with housing. We all have our own path...my mom was a single mom from the time I was 9 and my brother 5..I guess we were poor but my mom worked hard to give us a good home and food...never owned a house until she remarried. We, as adults had no expectation of help from her..she had given so much of that during our growing up years. She set a fine example of working hard for what you want and staying out of debt. And, as an aside, I don't understand people sacrificing during their senior years so they can "leave something" for their kids and grandkids. Live your life to the fullest you can afford and leave them to do the same..they will if you instilled the proper values. I'll stand down now..


    ReplyDelete
    Replies
    1. I think she is like so many people who think they are "worth it" and who can see no reason why they can't have all the things they think everybody else has. I bet she has had several foreign holidays over the last few years, because she deserves a break and so on and so on. I have no problem with those things so long as you can afford them!
      Regarding senior years, I am concerned that some people who can't manage their money will be able to get some of their pension pot as cash to invest as they wish. You just KNOW they won't invest it and will go on holiday or buy a new suite or give it to a needy grandchild.

      Delete
    2. This comment has been removed by the author.

      Delete
    3. My mum was much like yours LynnC and low and behold following her example my siblings and I have always worked, saved and avoided debt. Coincidence I think not!

      Delete
  4. My daughters ( now aged 19 and 26) have been completely financially independent from the age of 18, when they went off to uni. Both received grants, loans and bursaries as we are a low income family. They have never asked for a penny off us and have budgeted with their student finance; my younger daughter recently paid the bill for the van hire for us to transport her and her belongings back to uni to begin year 2 - she knew that she was expected to pay for it and budgeted accordingly. She is astonished by the number of people who have expensive mobile phone contracts (including the new iphone6) paid for by their parents despite the fact that they receive a similar level of student finance to her. Some parents are also indirectly footing the bill for their children to party their time away at uni.
    My elder daughter and her husband paid all of the bill for their wedding last year, and are currently in the midst of buying their first property (with no help from anybody). They have said that it's not the total amount of student debt that is taken into account when calculating mortgage affordability, but the amount repaid direct from their salary each month. In most cases this is a pittance, as you only pay 9% of any money earned above the threshold( currently £325 per week, £1,409.00 per month, £16,910 per year). I strongly suspect that many graduates won't ever begin paying their student debt back as they won't be able to find a job that pays enough to take them over the threshold.
    I had a ' discussion' with someone on my blog recently who told me that as my children were educated that would be a benefit to me as they would be more employable and less likely to be a burden on me as unemployed adults! I pointed out that as unemployed adult offspring if they wanted to live with us, they would have to contribute, as I wouldn't be scrimping and scraping to feed them and pay increased utility bills so that they could have the latest phone, nights out and new clothes! People may think I'm harsh, but our children love and respect us - they know there are no free rides in this life.

    ReplyDelete
    Replies
    1. I was pretty sure that you would see what I was saying!
      Over the last couple of years we have lent small amounts of money to the grandchildren to help them with transport so that they can get jobs (we live in a pretty rural area). Like you, any money we have is our pension and they will put they money back over the next couple of years.

      Delete
  5. My daughter and many of her friends are turning 17 this next school year and many of them are starting to think about driving lessons. Not only are many of the parents paying for the lessons but two I know for a fact had already had their cars bought for them ready and waiting for when they pass their test. I passed my test when I was quite young but I didn't have a car for years as I couldn't afford one. All my children earn their pocket money by working with their Dad, they then learn how to save and budget. To my shame they usually have more saved than me!!

    ReplyDelete
    Replies
    1. My granddaughter was telling her cousin about the car she had bought for £400. Her cousin asked her why she had spent so little and didn't get something a little newer. EGD said because that was all she could afford with the low wages she had. Her cousin coloured up as she realisd that EGD was funding her transport herself, while she had had a nice nifty little number bought for her by mummy and daddy and that they would also be paying the running costs.
      Different worlds!

      Delete
  6. I think it so much depends upon circumstances and individual cases. I have three grandchildren and all have been through University. The first one worked at weekends from being 14 - the second one had lots of problems she had to sort out so did not work and the third one also. But I have allowed each one £50 per month throughout their University days. I can afford it and it gives me pleasure to do it. I also give them limited money at birthdays and Christmas.

    ReplyDelete
    Replies
    1. That's really what I was saying. The woman in the article is in no position to help her children to buy houses and I suspect never will be. The most generous thing she could do for them is teach them how not to get into debt and how to live within their means. If someone is in a position to fund their grandchildren through college that's okay, but not if they have to work beyond retirement to do so.

      Delete
  7. My daughter worked from 15yrs washing dishes, 16yrs she waitress one night chip shop one night and worked in a factory shop sunday. At 18yrs she went to uni, got a job as a security guard in her student union and sunday worked at John Lewis/Harrods. She borrowed the loans twice. to pay for a holiday in the Phillipines, she did third world studies so relevent. 2nd loan bought a moterbike. I gave her food money from her 2nd year cos of her step brother who phoned me to wish me a happy birthday in Nov. and told me he had spent all his grant loans credit card could we help. I worked extra hours to pay for his food, he didm't get a job till he finished uni. we have helped him out in the eight years since. we stopped giving him and his wife money last year as we are retired. they holidayed in Italy, we stayed at home. My Daughter lives in Texas and takes extra work to pay for her trips home, step-son gets more debt.

    ReplyDelete
    Replies
    1. It is so difficult when they are so different isn't it?
      "They holidayed in Italy, we stayed at home " is so telling. I know of people who are being helped out by their parents who drive nice cars and holiday abroad, It is an expectation of things that we see as luxuries.

      Delete
  8. Lots of interesting comments here, it's so difficult to know whats best for children. Our eldest and her other half earn more than us so they are sorted!
    Our son and partner are now getting more settled and seem able to save so they will be OK. They both went to uni and have loans etc. Our youngest......well, we've bailed them out a few times, when the job situation wasn't good. I just couldn't have them living back here with us. She didn't do uni but has worked since 17, they are hopelessly unorganised, They got through her cancer together, so we just help when we can.
    Goodness that all makes no sense. Sorry. Early night needed I think!

    ReplyDelete
    Replies
    1. As I said it is horses for courses. You do what you can if you can afford it, but the women I discussed can't afford it.
      Like you our eldest and her husband are high earners - what DOES one buy them for their birthdays? - it is her birthday today - 47yrs old . While her sister earns only just enough, so long as nothing goes wrong or breaks! Different worlds.
      Hope C. is feeling better

      Delete
  9. When my oldest left Oxford, he had the usual nasty debt, and we left him to pay it off by himself. But recently he has bought his own home, and we coughed-up a contributory £60,000.

    Times are so different now. When I left college I had no student loan to pay off, I bought a house for £2,000 which I restored and sold a year later for £12,000. That set me up for life, and I've had never had a loan, mortgage, or debt since. An almost impossible task these days.

    ReplyDelete
    Replies
    1. Times are different now I agree. Though so are expectations!
      We bought our first house for £3,500. but then our weekly income was £18!. We had to find a 10% deposit. We sold it 14 years later for £15,000 after several mortgage interest rate increases which nearly saw us selling up. we bought this house 30 years ago for £49,000 (going halves with friends in a commune-type arrangement).we bought them out 20years ago and paid off the mortgage with my golden handshake 5 years ago. Goodness knows what it is worth now. If we downsized we could probably realise some money, but this is now the family home and we will stay here while ever our health allows.

      Delete
  10. We've always had to stand on our own two feet. We've got through some really difficult times - rocketing interest rates when we got our first home and unable to eat a healthy diet due to high mortgage repayments, losing jobs through ill-health and redundancy and as a result of this being forced to sell up before we were repossessed. Never once did we turn to either set of parents and ask or expect to be bailed out. We appreciate everything we have and look after everything we own. We are teaching our son to stay out of debt and manage his finances. I have friends who have no mortgage because their parents paid it off years ago, and give them lots of money to help bring up their children or to educate them.

    There definitely seems to be a shift in expectation. Parents seem to feel they should provide more for their children until well into adulthood. That's fine if you can afford it but if you can't then surely your children wouldn't want to take what you didn't have.

    People have to live within their means and not try live up to the incomes of those earning much more than them. Too much emphasis on image these days I think.

    ReplyDelete
    Replies
    1. When we bought our first house (we've only ever had two) the interest rates soared as did the price of electricity etc. It was SO difficult. Unlike you, we were lucky enough to hold on by the skin of our teeth. The 70s were a tough time.
      I also have friends who have inherited money, which we have never done, working for every penny we have. I suppose our children will have a decent inheritance when we go. They tell us to spend whatever we have now to keep ourselves comfortable, but we guard a hard earned nest egg in case we need work done to the house etc. It's not a lot, but I have friends who have earned hundreds of thousands of pounds more than us who have nothing put by for contingencies.

      Delete
  11. People no longer have expectations but believe that to have 'things' is their god given right.

    ReplyDelete
    Replies
    1. As the advert says " Because they are worth it" !
      Hello Easy Stitcher, nice to see you here.

      Delete
  12. Well, quite a lot of underlying grumbling about the younger generation. I would like to know what advice this poor hapless woman received from the newspaper but you dont tell us, Gill. Life is getting very much harder; house prices have rocketed because woman are now working and with a double wage/salary the housing market can demand higher prices. It is call "the two- income trap" here in the States.
    What is going to be next - sending our little kids out to work. Forty or fifty years ago a family could manage to buy a house and have children and eventually buy a car with just the husband working an average job; my parents did it - those days are gone.
    Now a lot of people are opting not to have children as they wont be able to maintain the lifestyle they are after and god forbid they should accept anything less.
    About 70% of parents here in the U.S help their children out financially.

    Oh, and paper routes by children ? Totally a thing of the past (and so they should be) Maybe we will get the mills working again up North and send them there or down the mines.......
    I help all my children out financial; I can well afford it and it makes me happy to do so.

    ReplyDelete
  13. The advice she received was to sort pretty much that which you have read above "..Needs to get a grip on her own finances before she is in a position to help her children".and " Before she does anything else she needs to sort out her debts" They recommended that after this she put some savings aside for contingency and try to increase her pension pot.to increase her pension. They said that as a matter of priority she needed to formulate a plan to repay her debts as,as it stands she has dangerous levels of short-term debt approaching half the level of her mortgage and she must not borrow any more and get out of the habit of relying on plastic or an overdraft.. They gave some good advice that I am sure you would agree with about how she might start this process, beginning with "spending less than she earns" and paying off the high interest loans first and to be wary of when the o% interest loans become due.
    Unlike you, this woman is in no position to help her children on the property ladder for the foreseeable future, which does not make her a bad mother, just one on a limited income.. no shame in that.
    Can't say as I have heard of the "two-income trap" over here, perhaps other have. It is about demand really over here, we are a small country with dwindling housing stocks
    I suppose the issue of "child labour" is a thorny one and I don't think I want to be drawn into this one with you Lizzie. Perhaps we should agree to differ!

    ReplyDelete
  14. The issue is not too often that of child labour but of grown up children in their 20's, 30's and beyond EXPECTING handouts from parents and grandparents whether they can afford them or not. I think both the children and grandchildren of the woman mentioned further up the thread who can't afford to retire and is frightened of redundancy because she is paying their university fees should be thoroughly ashamed of themselves. If you don't want to take student loans what's wrong with working for a few years to save before university and then woking part-time whilst studying? If the grandmother could afford it without making such sacrifices sure, why not, go ahead. We are creating a population who are always looking to someone else to bail them out be it parents, grandparents, the bank or the state. I have always been proud to pay my own way, such pride seems to have been superceeded by expectation of entitlement and sheer greed!

    ReplyDelete
  15. It's so hard to get on the property ladder in this day and age that I see no problem in helping our kids out if we're able. I think that's the point though, the woman in the article obviously isn't able, she's actually living in a dream world if she thinks she's going to pay off her debt any time soon. She really needs to wake up to the financial mess she's in and concentrate on sorting that out before thinking of spending anything else.

    ReplyDelete
  16. I got into quite a panic on her behalf. I worked out that it will take her up to ten years to pay off her debts(excluding the mortgage) which would make her in her late fifties before she could start saving or topping up her pension never mind saving money to help her children.

    ReplyDelete
  17. I do wonder about people sometimes! I think if you can help your children, great but there is a fine line between assisting them in their own hard work and endeavours and putting your own life and financial security on hold whilst children with far more of their working lives ahead of them enjoy holidays, social lives and consumer goods which their parents often went without to save up. The post earlier which mentions parents who helped out their grown up offspring and partner financially whilst they holidayed in Italy and the parents did without a holiday says it all!

    ReplyDelete
  18. I know things aren't easy nowadays, but frankly, I don't remember them being easy when we were starting out either. An abiding memory of mine is having 4 eggs in the cupboard and giving two to my husband when he got home and one each for the children. I told them that I had eaten earlier. I then surreptitiously had pickled cabbage(!) on toast (with cooking marg) in the kitchen while they were eating in the other room. This was probably when the mortgage rate went up to 18%.and I was trying to direct every penny we had to the repayments.

    ReplyDelete
    Replies
    1. When the mortgage rate went up to 15% we really struggled to afford food. Fortunately, at that time, we didn't have children. We made a huge pot of vegetable broth at the start of the week. It was so thick it set solid overnight. We would cut a chunk out of it each evening and water it down for our dinner. Funnily enough, my husband can't stand the sight of soup now! I still make it for myself. I've done the same as you though, and given meat/chicken off my plate to my son before bringing it to the table. I know things are a struggle these days for many people, but as you say, it was a struggle for us too, and nobody helped us out. We just had to get on with it. I don't think we even admitted to people that things were difficult.

      Delete
  19. I think that is the major difference right there, we did not broadcast far and wide about how hard up we were and it was a hard win badge of honour to manage on your own! I am not ancient so it isn't so long ago but how times and expectations have changed. I had two children under five, worked in an office full time and paid a childminder in full myself from my earnings without any nursery vouchers, tax credits, benefits or even tax relief. When I was particularly hard up I collected my children from the minders at 6pm took them to my mum's then started work at 7pm until 10.30 pm 2 nights a week in a local off licence and I kept that up for several years until I had managed to put a bit of cash aside for future rainy days.I didn't think I was hard done by or that anyone else should subsidise me, I was glad to have work and understood that my children were my responsibility. My mum worked so couldn't mind them during the day but she helped me out immeasurably by enabling me to work in the evenings and sometimes at weekends when I got the chance. They loved being with her and those times with grandma are fondly remembered.

    ReplyDelete
  20. Well, at least you could obtain a mortgage in those days even if you had to eat soup to pay it off. We ve all been there. And the idea of an unskilled teenage couple saving enough money for a down payment for house these days is laughable. We live in a world were only those with marketable skills will earn anything more than minimum wage and people who don t work at all will always be poor. Children should be getting an education that will help provide them with a decent livelihood; it is fine if they work in college on their breaks.

    ReplyDelete
  21. One major difference nowadays is that most people want or believe they should be able to, buy a house. I remember my dad being appalled that both my sister and I were going to buy. This offended his Socialist principles and worried him that we were taking on such a big debt! (because debt it is)
    The everyone going to Uni thing is pretty new too, with those who don't or who take on manual or unskilled jobs being seen as second-class somehow and underserving. When in truth they are the people who keep society going and ticking along. I can manage without someone who has taken media studies but not someone who keeps the streets clean, provides care for my disabled relatives or mends the roads.
    I'm college educated so have no personal axe to grind here!

    ReplyDelete
  22. This comment has been removed by the author.

    ReplyDelete
  23. This comment has been removed by the author.

    ReplyDelete
  24. I absolutely agree that if you are able to help out your children you should. I have myself at various times and have been happy to do so. As I said earlier so long as you are helping whilst they themselves work equally hard or harder towards whatever the goal is. The main responsibility should not be on the parents throughout the offspring's adult life. I am of the opinion and you may disagree that your main job as a parent is to ensure your children can function independently as adults. On another note it saddens me to see how many parents who have raised their children and made innumerable sacrifices are abandoned to a lonely and often fiscally challenged old age and paid scant regard by those children they helped. There are some amazing children but equally there are a lot of selfish and ungrateful ones too! For a number of years we have included just such an elderly person living nearby in our family events. It's not that their grown up children live on the other side of the world or even at the other end of the country. They live 30 miles away, all have cars and yet visit twice a year if that. Another debate I know but maybe a reflection of what happens when possessions are valued more than people. I'll get off my soapbox now, but it's been interesting to see different points of view being displayed.

    ReplyDelete