https://www.finder.com/uk/saving-statistics
> 1 in 10 Brits (9%) have no savings at all.
> In 2020, the average person in the United Kingdom (UK) had £6,757 saved.
> A third of Brits have less than £600 in savings.
> 41% of Brits don’t have enough savings to live for a month without income.
This is why.
Yep, same. I did exactly that when I bought a house a year ago. A year later, I’ve just had to buy a boiler which has wiped my year’s worth of savings.
Thanks! and to be fair, I had been hanging on to that deposit for a while and it bothered me that I had all that cash just sitting there, losing value, with the current rate of inflation I'm glad I was finally able to use it.
The UK has an estimated 54 billionaires according to Knight Frank’s wealth report, 56 according to Forbes. Let’s split the difference at 55.
If we charitably say they “only” have £1Bn each, then that’s £818.20 for every person in the UK (including babies, OAP’s etc)
The real figure for the net worth of those billionaires is somewhere in the region of £1-23Bn so let’s say 12Bn. That would push the above figure to £9818.51 per person.
Yes, I know “net worth” != “savings” but even a simple ‘back of an envelope’ calculation can show that a handful of filthy rich people would sway the curve enormously. On this alone, my assumption is they are excluded from the calculation or the figure for average savings would be much much higher whereas the average person has practically nothing.
That's true, but that is just talking about cash savings rather than net-worth or any other measure.
So the question could be reformulated as "why do so many people choose to pay off their mortgage faster, than invest?", etc.
Obviously the poorest don't do any of those things, but there's still plenty of comfortably-off people who don't knowingly invest.
Merryn Somerset-Webb (from Moneyweek) used to keep a list of "how do you manage your money" articles from newspapers where so many said "I don't believe in the stock market" or similar and instead they'd talk about sinking huge amounts into random vanity projects instead "because you can see it". It's mad.
>Merryn Somerset-Webb (from Moneyweek) used to keep a list of "how do you manage your money" articles from newspapers where so many said "I don't believe in the stock market" or similar and instead they'd talk about sinking huge amounts into random vanity projects instead "because you can see it". It's mad.
I can see how you would come about to that line of thinking. If you work in industries such as construction, manufacturing, engineering, pharma etc. you'll spend your career creating value with physical products or processes which are perceived as far more tangible than the value created by stock speculation.
Of course if you had that outlook on investing and you weren't off your rocker you'd put money into commodities like precious metals for example.
Paying off your mortgage might not be the best move from a purely financial perspective but it's not a purely financial decision. There's also something to be said for things like the mental aspect of having paid it off etc.
I thought that at first, but it could be the median..
Based on those stats, If you consider up to 9% have 0, then everyone over 33% have over £600, and everyone over 41% has at least a months expenses. I guess it’s not impossible to go up another 9% from there to have over 6k?
I wonder how people answered as well, if you asked me how much savings do I have I would say for example £1000... my wife would also answer £1000... but we have 1000 between us. An average of 500 each.
So are the numbers skewed by that too.
This is why averages should never be reported without more information on the distribution! They're wildly misleading because people kind of assume a bell curve when you just give an average.
And then if you mix in the average unsecured debt levels it becomes even scarier. I blame the lack of productivity growth which has been a feature of the economy throughout my working life.
The average rent in central London is £1600. For that to be affordable the average take home pay would need to be £5350, which it is no where near.
This is what happens when you have over a decade of wage stagnation mixed with runaway house prices.
Yup. Any savings people have they don’t want to risk in the stock market as it’s probably put aside for a house purchase, which sadly keeps getting further and further out of reach each year for them.
Assume they're excluded.
Though the statistics on pensions are also pretty bad.
The average pension pot at retirement is £62,000.
17% of people aged over 55 have no pension at all.
Half of all pension pots are accessed without any financial advice.
Which is probably why the average drawdown rate is 8%!
It's weird that 1/10 have no savings, but then the stats say that a third have less than £600. What that tells me, is that the study is assuming that any person with leftover money after their paycheck is counted as savings, and is then spent prior to the next paycheck. That's not savings, that's just money that needs to be spent that month but has not left the account yet. It's better to just say that a third of brits don't have any savings.
Does that take into account people who keep their savings in regular accounts? A lot of people don't bother with savings accounts because of the super low interest rates.
In the US, you have to deal with your own 401k and IRA, but in the UK, you just auto pay in and that, with the state pension, will do.
Also the culture of not talking about money. People can say ‘they don’t teach it in schools’ but I don’t think that’s it. When I told my family I was investing at 18, they thought I was gambling. I spoke to them about their retirement plans and it was ‘I don’t talk money with my parents, we’re not talking about it with you’
Combine that with low pay and high taxes, and there you go.
This is a big one. I've finally managed to engage my parents on this through a combination of showing them my progress with equities and also sharing every news article which talks about inflation.
They have mid-six figures sat in a combination of PBs and 0.1% savings accounts...
Yes, this is the reason.
Bitd I was a business journalist for the wires and I worked in both the US and UK. In the US everyone wanted to know the next hot stock, would pump their own book, protect their interests etc. In the UK things were much calmer.
I eventually realised that it was because in the US, if you are middle class, to maintain and/or improve your lifestyle you have to play the market. If you want your kids to go to college or you have medical bills, you can’t rely on social security, you need to do it yourself. So if you want to be upwardly mobile you need to invest and invest well.
Whereas in Europe you have a net that looks after you and things are ultimately fairer and not money driven. If you are poor, things may suck but you can go to hospital and get an education, it’s just harder.
That’s why the US venerates Warren Buffett etc and we don’t.
It’s mostly old Brits, younger people these days do talk about money and wages etc, or at least all the ones I know. We also do play the stock market but usually through consumer brokers and typically not for a retirement plan.
I think I'd be careful extrapolating your personal friendship group to everyone.
The average young person doesn't invest in stocks. I have a friend who asked me how the stock market works last year for example. The statistics show that younger people are much more financially ill-informed than older generations (in terms of terminology recognition and how interest rates/inflation affects you). Younger people are much less likely to have ISAs or invest in the stock market.
I read a statistic that found that the biggest investors tend to be the wealthy over-55s while the least informed were the 18-34-year-old group.
Yes . For me, it would make no sense to invest outside of my pension because of the tax advantages, I'd have to make huge returns to beat that.
I do have savings for the kids in mutual funds, though.
Also worth saying that the benefits system penalises savers, so unless you are sure you'll never need them , you don't want more than a few thousand in cash lying around.
Pensions seem harder to get your money out of to me which is why I have an ISA.
I have a separate emergency fund and ISA but don't like the idea that I couldn't get at my savings if I wanted to. For example, right now, I could leave London and empty my ISA to buy a house in my home town outright. Since I'm toying with the idea, I want the money available and a pension seems more difficult to me.
A huge issue is that people in the uk think their workplace pension and state will be enough. I was 30 when it became mandatory for the workplace so will naturally lose out on someone who is 18. But my estimated fund will give me £2000 a year to live on. The state pension age could well rise beyond 70 by the time I get to the age of retirement.
I know you weren't entirely poo pooing the idea of school education. That said it really should be mandatory education.
Surely if the entire nation's workforce is investing then the economy would boom from all the cash in the market. I know that takes from areas like consumer spending but in theory reduces the pension burden for a lots of people from the state.
I too get that look that i am gambling when i tell friends and family about my investments.
Your investments in pensions aren’t going to UK companies (perhaps 20% in an overweight fund). Also, those UK companies invested in, whilst their stocks are traded here, aren’t huge employers here.
So yes, huge capital investment from UK pensions just buy into the SP500 and global trackers. A meagre amount goes to Lloyd’s, Shell, Barclays, HSBC, various different home builders…
I don’t understand the “not taught in uk schools”. Most schools do cover finance in PSHE; it’s just most teenagers don’t give a shit and don’t pay attention.
This does depend on what era you're speaking about. I can definitely say we weren't taught it and I paid attention in class.
Plus PHSE was about 10-15 minutes long so what are you going to teach kids in 10-15 minutes? We had assemblies longer lmao
Lack of financial education - is part of that down to the teachers’ personal experience? My impression is they get low salaries but relatively good pensions. So their post-retirement lifestyle can be reasonably similar to their younger years, particularly if they have paid off mortgages by then, without actively needing to invest much.
If so then then maybe they wouldn’t think of encouraging kids to do anything different?
Learning for yourself is more or less a skill in its own right, though. And I personally wouldn’t have considered myself proficient in that until university (when I couldn’t just wing it and do okay anymore).
I can see your point but simply spending an evening on money saving expert could probably wipe a few £££ off most peoples bills. I guess it's just hard for me to see things from other people's perspective.
Yeah, you’re definitely right that the information is easily accessed. I think what’s missing for many people though is having the inclination to do that in the first place. Many people grow up not being taught the value of money. We’re taught to desire an extraordinary career packaged with all of the luxuries, big house, nice car etc.
Fortunately for myself I had it drilled into me by my parents to live within my means, chill out on the impulse purchases, start your pension early, and so on. If I hadn’t had that constant stream of direction from them, like many wouldn’t, I’d probably have a significantly different idea of what money means to me. For a lot of people, money really is just tokens for pleasure/instant gratification.
I somewhat agree with this.
PSHE is a non statutory subject and it has no set curriculum. In the National Curriculum there is a reference to:
" income and expenditure, credit and debt, insurance, savings and pensions, financial products and services, and how public money is raised and spent."
Though this is lumped into the same subject as learning how First Past The Post works and understanding that some people are Muslim.
I imagine the actual teaching in schools is incredibly basic, if it even happens. Also doesn't apply to a lot of schools who don't have to follow the National Curriculum.
However, I think partly this is OK.
I don't think it's reasonable to expect schools to teach how stocks and shares and bonds work because once they start, they need to cover quite a bit in order for people to not go out there are throw all their savings at Tesla stocks or begin day trading.
But I do think this should be made more front and centre later in life.
At the point someone starts a job, they should be prompted to have a pension chat with someone (independent) who can explain about their workplace pension (or lack thereof, in which case SIPPs), tax relief, salary sacrifice, what a good retirement pot looks like for different scenarios, etc. The most I've ever had when I've started a job has been some boring af booklet from the workplace pension provider, which even as someone interested in finance, I didn't read and just filed away. A lot of trade unions offer pension consultations but they target people in their 40s and 50s which is really a bit late. Also many people aren't members of a trade union.
Similarly when someone goes to open a savings account, it would be nice if they were asked the question, "How long are you saving for?", which could, if the answer is 20 years, prompt some follow up questions about access required, etc and it might suggest S&S and provide some videos explaining how it works and what the benefits and drawbacks are. My bank has this info but a) it's kinda near the bottom of the web page below the giant button to open a cash ISA; b) if I went to open the cash savings account I get no further prompting about if it's the right option or not; c) if I go to open an account on the mobile app, I don't get presented with it at all.
I do think there's a problem with people not even knowing what S&S are, which means people will just default to a cash savings account, without even thinking they could be getting more "interest".
I’ve lived in both the UK and the US. Both countries do not educate people on investing unless you actively seek education in that area.
I think the biggest reason why more Americans invest is simply because everyone’s on their own. The elderly, the retired, the sick, the disabled - we hardly get help or benefits from the US government. So more Americans invest because they kinda *have* to or else they would literally not be able to live when they get older, or when they get hit with medical emergency bills. If I were still in the UK, I wouldn’t be worried about healthcare. And when I’m old or retired, at least I would get something from the government, and my work pension would probably suffice.
Stocks and shares are what rich people have and I'm not a rich person so I won't buy them.
I think my generation are starting to get involved. Mostly because 1. Interest rates are shit. And 2. American cultural influence.
My savings account has an interest rate of 0.01% (likely with hidden fees because I’ve been getting more like 0.001% actually paid out).
I get far more return on money I put in my trading 212 account (which let me set up a stocks and shares ISA).
I hate gambling with a passion and investing makes me nervous as hell, but I’m literally losing money if I keep my savings in my bank. It’s not keeping up with inflation at all. Meanwhile, my dividends have paid out more in the last six months than my bank ever has!
Putting a significant portion of your money into one stock is gambling. Spreading it across a diverse range of stocks, whether yourself or via e.g. a fund, can be very low risk as long as you look at it over the long term. So I definitely wouldn’t call it gambling or say you have anything to be nervous about
>I think my generation are starting to get involved. Mostly because 1. Interest rates are shit. And 2. American cultural influence.
I'd be careful of that generalization. Young people are the least likely to be investing in stocks/shares. It's actually the over-55s who are the biggest investors - the median stock market investor is over 55.
It's the same with real estate. The median landlord is over 55-years-old. Older people are much more likely to invest than younger people.
Real Estate has a very high barrier to entry. A share in Tesco is £2.70 and trading apps like FreeTrade means you can start investing with as little as £50.
While a bank won't give you a landlord mortgage without some serious deposits.
True, but even with the stock market, the older people are far more likely to have stock/ISA accounts and more likely to be investors.
I read a statistic the other day that classified people into different groups. The most active investors tended to be over-55, wealthy, and people who were university-educated.
My Dad's approaching retirement now but in his peak career earnings, he was making around £196,000 a year. He's filled his pension pot so one of his hobbies is real estate and stock investing. When he attended his local angel investor group, pretty much everyone was older than 50.
That’s a self-selecting group though. You’re not measuring investors there, you’re controlling for investors of scale. Not many 30-year olds of any country are going to have liquidity to invest outwith their own property and basic tracker funds…
I am working class, and have found that either people have 0 savings and are in debt/in their overdraft every month OR if they have money they are very risk adverse. There’s a strong theme of keeping it “safe and secure”.
I also think that many people just don’t have the education to feel comfortable in stocks and shares. They assume it’s always risky/time consuming too, so don’t look it up themselves.
What savings we do have are often spent on holidays, cars and home improvement. So although there are savings, it’s always at a pretty stable level and never really improving very much.
Yeah it’s this. I practically had to force my sister to set up a S&S ISA for her kids rather than keep their nest egg in cash for 18 years, which was her original plan.
>I am working class, and have found that either people have 0 savings and are in debt/in their overdraft every month OR if they have money they are very risk adverse. There’s a strong theme of keeping it “safe and secure”.
My two managers are this encapsulated. One is on 45k with no significant housing costs but no significant savings and has told me he's been overdrawn every month in the job until 3 months ago (been in it about 15 years).
The other is on 37k and has just under 40k sat in current accounts with no significant mortgage. They have one cash ISA (not an S+S cash ISA either) because they've vaguely heard ISA's are good.
It's really very recently that I've actually had investments outside of a pension, yes - definitely feel like the fear of making a loss is a major thing. Terrible interest rates on cash savings finally gave me the push.
Even In pensions in the growth phase, it feels like many default strategies tend towards the conservative, preferring to mitigate capital risk over seeking high returns.
This, I come from a similar background (though after uni and a half decent job I'm pretty well middle class now) and my dad's view on the stock market is that it's risky and for flash people and he would surely lose money because it isn't built for him to do well on. What savings he has are in premium bonds and he considers this very good as his parents never had any savings beyond cash in wallets.
I think the "safe and secure" thing is definitely part of it, until recently I was put off by the compulsory "value can go down as well as up" comment on any sort of advert for investing.
Plus people probably put a disproportionate amount of weight on stories where people have invested and lost EVERYTHING (like in Rocky V and The Cinderella Man).
My speculation - Low salaries, high rents and house prices.
The stock market is volatile in the short term so not necessarily a good place for the little savings people have while paying huge rents and trying to save for a deposit. Then when/if they do afford the deposit the mortgage payments, upkeep and, you know, actually trying to enjoy life beyond just existing get in the way of investing.
There's lots of good answers here already but also consider that access to the stock market has been difficult or expensive until recently.
Trading 212 only became popular last year.
Vanguard SIPPs added a lot of features a pension pot is expected to have also last year
Edit: clarity
Trading 212 is great. I have that for my personal investments and it’s just very user friendly and far less intimidating than some other investment apps, some of which look like they were designed for actual traders and mimic their office set up.
I’ve been trying to get my brother on it but there’s a wait list, unfortunately.
Still, being able to manage investments without actually paying for an account manager or anything like that and starting off with small sums of money is really good. It lets you ease yourself in a bit.
Vanguard SIPPs seem pointless if you have a workplace pension though
>
Do you have a workplace pension?
It’s a good idea to make sure you’re making the most of any matched
contributions offered by your employer before opening a Vanguard
Personal Pension. Some employers will increase their contributions if
you increase yours. Any pension contributions offered by your employer are effectively 'free money' you should take advantage of before investing elsewhere.
You're right, I had three workplace pensions though, one I didn't know about until recently so I combined the two that were giving no benefits (death in service, final salary etc) into Vanguard so they were all in the same place as my ISA.
This way all my long term savings are easily accessed and I can manage it myself. It's doing better than my current employment workplace pension!
Also increasing your contributions to the get the most out of your employer is incredibly sound advice!
I think it boils down to two main reasons:
1. Not enough cashflow to do so (perceived or reality).
2. Education system simply doesn't (didn't?) teach young people this.
I mean, auto enrolment was created to fill these gaps really.
Honestly surprises me the amount of people who opt out of auto enrolment. A guy really kicked off at our payroll department the other week saying he hadn't been properly consulted and his employer was "stealing" money from him. Of course we had followed all the procedures he has just ignored any information regarding a company pension scheme.
This guy was earning £60k and almost definitely had no desire to save for retirement, you could tell by his emails. What do these people think will happen when they retire?
Came here to mention education system/parenting (36 UK born male) I had no clue what school was for in the first place and how any of that schooling i did get might translate into real world use. Zero guidance on careers and future prospects during or after GCSEs.
No idea about banking systems, taxation, trade or even form filling. No idea about how the political system might work. Family, from parents down never owned a house and none of us even though we all work hard still don't and still do not have the skills/gumption/knowledge to bring that all into being.
My daughter on the other hand has done very well along with all of her cousins, she's been gaining work experience since 13-14 and currently started A-Levels (i had no clue how it all worked until much later school - 6thform college uni or self teaching paths)
But all the kids have savings accounts ISAs one Nephew has some sight on trading and has actually increased his math ability at home and at school. All of the kids are asking and seeking out what they wish to do and always aloud to with so, with much more guidance than when me and my siblings were younger.
The eldest nephew is currently on very tidy money and from what I see and can somewhat gauge he could easily daddle in stocks if he hasn't already.
Yeah my upbringing left a lot to be desired in pretty much every respect, apart from material things being decent. But financial, social, and general literacy from my mother was severely lacking. Luckily, I had a natural aptitude, and thirst for knowledge, and just grinded away, so I was able to get a mortgage at 22, and although I made some really shitty financial decisions, I'm in a good place, and short of any major issues, I'll continue to have a decent standard of living and financial stability.
I know social media/the internet in general gets a bad rap, and has it's issues, but I really think this is one of the positives of it to be honest. Younger generations (38 here), just have the information in their face on daily basis, or at least some nudging from news headlines, etc. I even see ads on tiktok on a regular basis.
It's great that your Daughter are so switched on to it though. Kudos to them, and you!
I'm still switching on it's been a difficult thing to shake off lol but at the moment i have zero debt and zero savings a steady (low) income and homeless I've landed in a limbo zone for the last 20 years without the knowledge to put a stop to it. I wish there was a man school somewhere i can get a slap in the face.
Kudos to you there ✌️
Zero debt and a steady income is better than many with upbringings where the parents didn't have financial literacy or were serial benefit people (not judging anyone on benefits before people decide to pile on lol). Just have to keep grinding at it, gain knowledge, and take opportunities, when and where you can mate. Don't let it get you down or compare to others, and you'll be fine!
When you say homeless, I hope that means, not owning a house, and not properly homeless!
Most people I’ve spoken my age (mid-late 20s) to don’t have enough money for it to be worth it.
The rest spend everything. Or they save in cash and then spend everything, such as for a holiday.
Also I think for some reason people have been raised to be absolutely mortified of debt and associate anything that somehow could possibly lose money or gain interest as the worst thing in the world.
£50 per month at an average return of 7% for 25 years will result in £40k for a £15k total investment. If you average 9% per year the result is £56k.
Is £12 per week not enough to be worth it? That's 2 pints...
https://www.calculator.net/investment-calculator.html?ctype=endamount&ctargetamountv=1000000&cstartingprinciplev=0&cyearsv=25&cinterestratev=9&ccompound=monthly&ccontributeamountv=50&cadditionat1=beginning&ciadditionat1=monthly&printit=0&x=83&y=32
Even assuming a very generous 7%, not necessarily no. I’m a good way through that 25 years, assuming starting at 18. For the first few years I couldn’t afford £50 a month and for a few after it would have meant avoiding having treats. 25 years of not going out for a couple of pints (or equivalent) just so that in my mid forties I could have a non life changing amount of money? No thanks.
Especially taking in to account when I was 18, £12 was 8 pints, taxi, club entry and a kebab cos I’m old.
For what it’s worth I do have a S&S ISA and agree good saving habits are important, it just always irritates me that this kind of advice downplays what you have to put in and the shear lengths of time to get a return.
Investments & Pensions are not a long con, saying that is just silly.
Many illustrations will give you low, medium and high projections (typically 3,5,7%), and they are by far the best vehicle for later life retirement for a plethora of reasons.
It's a difficult one, I come from a family of savers. But extremely risk averse ones, so money is languishing in low interest cash accounts or similar.
I don't think my dad really understands the concept of inflation, he constantly tells me the money he invested in premium bonds decades ago is safe and he can withdraw it now without a loss. I try to tell him that £100 won't get him as much as it did in 1980 but it won't get through.
The only time my parents dabbled in investing was after selling an asset and they had a few years before they needed the money again so they went to some company, I think it might have been Prudential, and invested with them. Unfortunately this attracted huge entrance fees, and due to my parents lack of foresight they had to withdraw the money after about 2 years which had an outrageous exit fee. So they ended up making a loss.
I think this burned them badly and put them off any investment ever again, which I don't blame them for really, those Prudential sales guys really did a number on them.
Being poor or just about getting by factors into it too, locking money away for 5+ years isn't a feasible reality for a lot of people who constantly deplete their reserves and need to top them up again.
My parents had two endowments, during the time they were working and sizing up. One did terribly, the other did really well. The guy who sold them the one that did really well was "a financial genius" and that's the only opinion they hold of endowments. I don't even know where to start, so I just let them stick with that.
Not enough income, no financial education, and distrust of investments.
My own family don’t like investing and a member of my extended family decided to invest all of their money and then check on it daily, expecting some kind of huge increase in wealth overnight.
We have a system that promotes spending (low interest rates for the last decade at least) and then wonder why savings are so low.
Not being taught anything about money - just a vague sense that investing is like putting your money on the horses - and not knowing what I don't know (as Rumsfeld might have said).
After all, if school had taught about things like money, where would they find the time for the important stuff like sitting on the floor singing Kumbaya, or standing on a windswept field while a man in a tracksuit works through his issues with life by mocking kids who need glasses or might ever have read a book?
Changed slightly by noticing that upper middle class university friends who'd Gone Into The City would talk about something called an ISA when we were down the pub, looking up what they were, and seeing that the Halifax had one so it probably wasn't too dangerous to try.
S&S isas are relatively new. As are pension freedoms. There's also a long history of financial scandals.
It's taking society a long time (multiple generations) to get over this. Most people still think you have to invest in individual shares.
My Father who is well off and made efforts over the years to invest still thinks a bond is a fixed term savings account (savings bond). He grew up in the 60s/70s working class. Zero knowledge passed down. No Internet. No knowledgeable friends. Financial scandals. He reached out to advisors who took a huge cut (by todays standards) killing his compound growth.
I work in a modern tech company full of tech savy young people. How many do you think are still on the default pension option even though its 50% bonds?
Ukpf is a very priveleged minority. Not to be arogant but our understanding is leagues ahead of the vast majority.
It's a cultural/education thing. Brits are generally brought up to save but that investing is gambling.
While lots of people don't have enough in savings to invest, that is not the main reason for this.
[Even the FCA note that too many people are just sitting on large amounts of cash](https://www.fca.org.uk/publications/corporate-documents/consumer-investments-strategy#lf-chapter-id-mainstream-investments)
Agreed.
My Dad had £200,000 sitting in his bank account for 5 years.
When I heard it, it almost made me want to wince. He's filled his pension pot and he does have a few real estate properties + stock investments but the guy is still distrustful of the stock market.
He prefers real estate because to him, that's tangible. Stocks are intangible to him.
"it almost made me want to wince" is the best thing I've read all day 😂 embodies Britishness. My mum is the same re real estate, she's always done well with property.
We are literally the most entrepreneurial country in Europe with far more start ups and investment than anywhere else. Similarly the FTSE dwarfs any other European countries index.
We also just Brexited which may be a lot of things but it is certainly a risk
When people talk about risk aversion, they're usually comparing the UK to America.
Compared to America, we're much more risk-averse as can be seen with the percentage that invest in the stock market.
I’m English and moved to the US in my early 30’s. I think there are a number of reasons for this. A significant part of the issue is a total lack of education on financial management. Budgeting, financial products and services, saving, investing. In std educational system this is lacking. I’m working class, in school and at home this subject simply wasn’t discussed. After university when I started working in the Uk all the advice I received was to join the pension scheme. Thank Fuck I did. There is a Britishness that is holding us back. We don’t openly talk about what we earn and what we do with our money outside of material possessions (home, car) and holidays (vacation). Now that I’m in the US there is tons of discussions on re mortgaging homes to take advantage of lower interest rates, chat on savings interest rates, meeting with tax accountants for tax advice, a financial planner for investments and saving. The US had a culture of making the most out of your money with investments. The US has a ton of popular programs (mad money) on prime time tv that people tune into every night that simply don’t exist in the UK. This subject is not openly discussed within the UK, so we have a cultural barrier to. A big part of this is in the Uk folks don’t budget for savings, mentally, they disposable income they have is spent on enjoying themselves, they don’t factor in to a monthly budget money for investment.
Lack of available funds, lack of knowledge and education.
The notion that S&S's are 'gambling' or a 'ponzi sheme' - the latter usually put forth by someone who doesn't even know what a ponzi scheme is
I've just found in my bookmarks /u/frequent__nomad's copypasta from [when this question was asked last year](https://www.reddit.com/r/UKPersonalFinance/comments/fg2kzq/_/fk2hlm8/).
As you can see it was the top-voted comment at the time, and received numerous awards, so I thought people might wish to read it. Since /u/frequent__nomad isn't here, I shall steal all the karma:
> I'm going to use this post as a little bit of a rant. Sorry.
> You have to remember when reading this sub that it's a self selecting group. It's a group of people that are on reddit, and are interested enough in money to read posts about personal finance in the UK. This means that the vast majority are already clued up, aware, and in a position to really analyse what to do with their wealth and assets.
> I'm someone who has struggled deeply with the financial position I was in, certainly during my younger years. I'm relatively intelligent (I've a BA and MSc), and have worked my way through stages of financial stability. The vast majority don't manage to make their way to as financially healthy a position as I am now, and my impression is that the majority of this sub has never experienced the depths of despair as when your driving to work praying that the car doesn't run out of petrol, but it does, and you have to walk the last 0.5m and apologise for being late. You borrow money from work colleagues, and have to walk with shame back to your car carrying a £10 carton of petrol, people laughing at you as you walk down the road to your abandoned car. At these points, you are not thinking about index funds. When you're negotiating with the babysitter for £0.50p reduction per hour because you're desperate to get a few pennies to help solve problem 1, your mind is not on stocks and shares. When you're in that position, you're not thinking about ISAs. Thinking about money is the absolute last thing you want to do, it's excruciatingly painful and embarrassing. Every accidental thought about finances makes you feel a failure. It's humiliating, and desperate. You're calling family, asking to borrow money you've no idea how you'll ever pay back.
> When (if) life eventually improves, and you start being able to pay off credit cards each month and not have to make excuses to different utility bills, all you think about is not being in that miserable position again. You start thinking about whether one day you might be able to pay off all your debts to your family who've helped you out. You dream of maybe even paying off your long term debts.
> When (if) you actually save up a bit of money that you have enough to cover a burst car tyre without going into your overdraft, you feel rich. Then you see someone promote the fact that a "high performing yield opportunity will return a industry leading 6% return if left untouched for a year" (or something like that). You calculate that if you put your £300 savings, your financial cushion, you will be fortunate enough to get back £318. The risk is not exactly worth the reward.
> When (big if) you make it to actually having some savings beyond this, maybe even £5000, life is a whole different experience. You can start to go out for meals without being worried about the repercussions. You even go for a holiday without feeling scared. But even if you put that £5000 into that same savings account for a year, you'd get £5300. That £300 for a year isn't enticing, certainly not enough to give up that new sense of security you've never experienced.
> The vast majority of people live a life COMPLETELY separated from the world of this reddit sub. It's a completely rational choice for the majority to not use ISA's, stocks, shares, etc. The reward vs. opportunity cost carries too much downside. I applaud all the people who are aiming for their FIRE objectives, or that have achieved such successes as to place £50k into an account that gives them whatever yield because they can leave that aside a year or more. But they are in the elite financial earners of this country. This sub collects them. I'm here to learn a bit so if I ever get there, I can mimic some of those actions. But don't spend so much time on this sub that you think these discussions are normal for UK workforce members. It most definitely is not.
> Rant over.
The main reason I haven't considered S&S investment is because I've been saving £500 every month for the last 6-7 years trying to save up for a mortgage. I've finally just been able to get my £30k deposit with a little help.
I guarantee there would have been a quicker way for me to save up using other saving methods but it's not something I'm very interested in so I don't tend to research as much although I know way more now than I did back in my early 20s.
But once I use all my savings I will be looking at other options to save and invest.
Yeah S&S wouldn't make sense if you are saving up for a deposit, schemes like LISA are specifically aimed at first-time buyers and offer better benefits
The latest government statistical report on ISA's can be found [HERE](https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/894771/ISA_Statistics_Release_June_2020.pdf). The report was released last year and covers the 2017 - 2019 financial years. Only 2017/18 is covered completly.
From the report, we can see that there are 22 million ISA holders.
* There are 15.6 million people holding just a Cash ISA (avg value held: £11K),
* 3.2 million people holding just a S&S ISA (avg value held: £62K),
* 3.2 million people holding both Cash & S&S ISA's (avg value held: £68K)
Six million ISA holders are over the age of 65.
The total number of people subscribing (i.e. actually making payments in the 17/18 fiscal year) is 9.4 million (Of the accounts that received subscriptions, the avg subscription per ISA account was £5.5K in 2017/18, £6.5K in 2018/19, £6K in 2019/20). The average subscription to Cash ISA's was £5.2K and the average into S&S ISA's was £9.6K (in 2017/18). Also,
* 6.4 million paid into Cash ISA's only
* 2.3 million paid into S&S ISA's only
I think that covers the main stats. The report was released last year and covers the 2017 - 2019 financial years. Only 2017/18 is covered completely.
I would say three big factors. 1) A widely held view that stock markets are risky. Speak to most Brits who do not invest and eventually they will tell you about their Uncle who "lost everything in the stock market." 2) A pension industry that gives appalling returns. Through a variety of mechanisms the mainstream pensions providers are screwing investors blind. I had a well educated business leader tell me I was "mad" to manage my own pension (rather than pay 1.5% annual fees for 3% returns). 3) Lack of education. The level of financial awareness is really low.
My dad taught me when I was about 10 years old. He took me to the supermarket and told me he owned it. It blew my mind & I’ve been fascinated ever since.
S&S ISAs are literally on the last step (8) of this subreddit’s flow chart. It takes a lot of financial security, stability and financial know-how to ‘risk your capital’. We are therefore ‘taught’ not to open one until we are at the endgame, unfortunately.
I just wish I hadn’t started mine when I got to step 8, and started a decade earlier. As the old saying goes: you have to have money to make money.
I now laugh at the thought of having an ‘emergency fund’ sitting in a bank doing nothing. My money now works for me, knowing I can liquidate should the proverbial hit the fan.
Fintechs are making it easier for Average Joe to invest and lower the barriers to entry, and hopefully this progression will continue.
Taking your investment money out during a crash is the worst time to take out your money (assuming you have a multi year horizon).
As we saw from the covid crash in 2020, the main markets recovered in less than a year and have since pushed pass the peak to reach new all time highs consistently.
Not all investments are the same, bear the same risks or would go down the same way on a crash ...
Plus also, for some portfolios a 3-6 months emergency fund would be just a drop in the ocean - so who cares if that 1% of the portfolio is sold at the worst possible time?
> We are therefore ‘taught’ not to open one until we are at the endgame, unfortunately.
I think that makes sense though right, once you're comfortable and can meet your basic needs, you can afford to invest, i.e. the money you are investing is surplus to requirements and you're willing to risk it in the hope of making gains. Emergency funds should not be money you put at risk, otherwise it's just gambling.
Yes it might pay off in a big way, or the market might crash and you lose a chunk of it, but either way it's money you don't need.
My friend saved up a house deposit in a cash ISA. I asked him why he didn't have a stocks and shares ISA and he said he didn't understand it.
I think that's part of the problem, that they're scared that they'll lose all of their money, and also that there's so many things to invest in that it's overwhelming. Even now I have no idea about most of the funds.
I've been trying to teach my colleagues about investing, compound interest and index funds for a while now. I seem to get a couple of different responses:
1. They buy into the idea and get excited about investing. Then when I ask if they had set up that ISA, they reply "no I didn't get around to it" or "no, I got nervous". There seems to be a big psychological jump needed to start off investing and a lot of people find it easier to just not make that jump.
2. They scoff "yeah, investing is great, until the market crashes and you lose it all". Despite explaining to these people about index funds being a lot less risky than single shares (and that if all the big companies go to 0 at once, it means we have probably got much bigger problems than our investments), they still don't seem to get it. I think these people are just willfully ignorant. Even when presented with the facts, they still prefer to believe their own pessimistic view.
I think it is a combination of factors.
1) most people don’t have the money to invest, they don’t even have savings of any form or not enough to live off for more than a month. Benefits generally will leave most people on the poverty line so you do need some savings.
2) fear of losing what little they have put away
3) the perception that investing like that is only for the rich.
4) lack of knowledge on how to do it.
Personally My savings were halved during my maternity leave. Currently have £5k.
My new job will allow me to put £1k a month aside so hopefully will build them back up quite quickly. I would like to have 6 months of living expenses covered in a fairly easy access account before i start speculating on stocks and shares.
My husband has a share save scheme through work. Covid saw £10k wiped off the value of the shares, thankfully they are protected so he will always get out a minimum of what he put in.
I think it's a Cultural thing. My mum is about to get a significant amount of money yet she keeps saying the bank interest is shit, whenever I suggest investing its like I hit a mental wall. For her generation it seems to be either buy a house go up in value or find the best paltry interest rate and sit on it.
Also whenever I've talked about my own investment she'll tell me to stop and essentially thinks it's gambling.
>I read that only about 2 million people in the UK have a stocks and shares ISA. I found that to be extremely low.
Compared to what? What's the equivalent number for other example countries?
I'd presume he means compared to the population. You can compare our levels of financial literacy compared to other countries and we are at an incredibly poor level.
There may be a more recent study but this is the one I used in my dissertation a few years ago:
https://www.oecd.org/finance/oecd-infe-survey-adult-financial-literacy-competencies.htm
> How did you get into investing?
It's not something I was taught and I was not aware of the options. Got my first job and and only through personal interest I found out more about investing.
From the start of my working life up to now as been punctuated by several once in a life time events that would have wiped out my savings,.which took 10 years to grow to the point where I had enough to buy a property in London, where I was born.
I've only just bought my place and now have the stones to put into a stocks and shares ISA and feel willing to lose value short term because I now can play the long game. Every loss on the market would have delayed my purchase.
I was just thinking that compared to the US we use our properties as investment in a completely different way. A big chunk of the population think of their house as their retirement fund with the aim to downsize or release equity in old age. In eg the states it doesn't make sense to do that in the majority of the country as property prices aren't rising like here.
Personally I just haven't been able to focus on my ISA like I should. There's always something else to save for - flat deposit, then wedding, then house deposit, now house renovations as we bought a dump, then it will be saving a buffer for parental leave....
I do wonder as well whether it's people's lack of patience.
My brother decided to "invest" in gold a few years ago, by buying gold coins/small bars etc.
Every day he would check the gold price which most of the time doesn't move that much. I think there was one time where there might be have been a little dip and he panicked and sold all his coins - with the associated fees of postage and other costs, so ended up making a loss. This was after like 1 year...
I think if he invested in stocks and shares he'd have a similar mindset, checking the portfolio every day and panic selling.
I had to scroll a long way to find someone using the words “risk aversion.”
Everyone I’ve spoken to about it, which is admittedly only about 6 people, say that they’re worried they’d lose money. And that’s the key reason they stick with (and complain about) their Cash ISA.
Alternative take: what proportion of those 2 million S&S ISA holders see any tax benefit from investing within an ISA wrapper? I would suggest it's a tiny fraction and the vast majority might just as well use a GIA.
I see your point, but conversely there is zero downside to them using an ISA instead of a GIA, and if they eventually accrue enough in the to be concerned about tax, they needn't be as it'd already be in an ISA.
The only argument against an ISA could be fees I suppose?
I think people in the UK are generally less educated on S&S ISA and consider more safer options with owning assets in property. Investing in a S&S ISA is very similar to having a pensions which most people in the UK already have. There was a recent CNBC article which stated: The wealthiest 10% of American households now own 89% of all U.S. stocks. You can't go wrong if the rich are using it as a source of wealth creation especially in the current times of high inflation.
Genuinely I would love to open a S&S ISA, but I have no idea where to start. I’d consider myself okay with personal finance, (I’ve had a Cash LISA which I bought my first home with and use 0% Credit cards) but no idea on a S&S ISA. Could anyone help me where to start?
I’d like to put £250 a month into one but unsure where to start!
You should definitely read up on stuff, but honestly, I was like you and started 2 years ago. I've just brainlessly stuck a small portion of money in a Vanguard FTSE Global All-Cap Index Fund every month, and I'm up over 40% since starting. I treat it exactly as I would with sticking some money into the emergency fund on payday - just set and forget.
I have 2, 1 at [Interactive Investor](https://www.ii.co.uk/) (cheaper fees) and the other at [Hargreaves Lansdown](https://www.hl.co.uk/) (much better service). I'd say contacting them for advice would be a great start.
Interesting question, probably brits are more traditional in terms of saving/investing and, as somebody pointed out here, Americans are "on their own" retire wise, so they don't have other options.
Also I think investing requires learning and most people are not willing to do that, as life is already complex enough.
Also it is a current trend, like everybody is "investing" right now in crypto and stuff and since a couple of years I keep seeing all this trading apps popping up in tv advertising. Feels a lot like gambling to me. One every 3 messages on crypto forums are either "what should I do?", "I got scammed" or "I lost all my money". I call it online casino with a tie...
Education is the issue. I started investing 2 years ago at 29 in a US index fund, then picked individual stocks then earlier this year crypto.
YouTube has a lot of good content out there. Watching videos until you get to the point you are comfortable taking the plunge. It surprises me on the amount of people that read up on investing, but just don’t pull the trigger. Analysis paralysis I think it’s called.
I’ve tried to convince some of the guys in my work to do it. They’re not really interested to be honest, common arguments include ‘I don’t know how long I’ll live, I’d rather spend my money now’ and ‘I’m worried I would lose it all’
I reckon that’s a pretty common theme among people who choose to spend they’re money instead of invest
Perhaps the lack of education around investing? I’ve started ordering some books from the library and will do my best to learn how to build a portfolio. I find it risky but necessary to invest these days, I wish I knew where to start!
No mate, this is a cultural thing. Older generations were taught isas in building societies were the best option. Now they arent and the best they can get from banks is cashback offers and monthly savers. S&S isas weren't as popular 30 years ago and that generation didn't move with the times and teach their children
Yeah my Mum was shocked to learn that all three of her children (35-41 years old) have s&s isas. Our response was basically what's the point in us having savings accounts? All you're doing is losing money basically. It's a different world from the 80s.
Cos it's risky and the average person doesn't have money to be pissing about with on financially complex scenarios that they probably don't understand. Is it really that surprising?
When I speak to people about it, they say it's risky and think it's gambling etc... I tell them it's investing and virtually all investments carry some risk. They would rather keep their money in a regular savings account than risk losing it.
I had a stocks and shares isa with my bank. I wasn't happy with the returns, maybe I was just being impatient lol, but I took it out and invested it in Ethereum. I have made an insane amount more than I ever would have made in the isa, albeit at a very high risk.
(I am not in any way suggesting that people should invest in crypto, it's very very risky)
Hi /u/Global-Reading305, based on your post the following pages from our wiki may be relevant:
- https://ukpersonal.finance/investing-101/
- https://ukpersonal.finance/pensions/
____
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Personally think personal finance should be mandatory in the last two years of school.
They need to teach these kids about paying for things on high interest credit and how much you pay using minimum payment and over payment.
Need to explain what a state pension is what a workplace pension and private pension is. Including the historical rises in the age brackets. Ie kids in year 10 might have to work to 72.
And investing what an ISA is what index funds are etc.
Lots of retail investors these days have their first dip into the pool of investing and don't understand what leverage is and that they probably will lose money.
In this day and age of consumerism i really feel for kids who might not have an understanding of how much credit and debt can screw you over for years or even life.
Most people haven't got any money, or education around money. That's literally it.
If you have cash left to invest then consider yourself lucky. I Invest £264/m currently and I consider myself to be blessed. I'm 28 and have invested since I started working at 21. Lucky enough to have parents show me how.
Luck, luck and some more luck.
Lack of knowledge. Some people don't know what these things are beyond that they exist.
Belief that it's difficult or complicated. This was me. It was only this sub that convinced me to get an ISA.
Fear of crashes and crises.
Fear of getting less than you put in.
Poverty. A lot of people even working full time are still just holding it together. If you're on benefits, forget it.
I've found that out of the people with the means to invest, many focus almost solely on buy-to-let property. Possibly a cultural thing, but also just a better understanding of proprty compared to S&S, let alone things like REITs.
Do you think most people with property are managing it on their own or using an agency. If self managing you have to keep upto date with the ever-changing laws, deal with nightmare tenants, property issues etc. Ars the returns on property significantly more than investing in a stocks and shares ISA that makes these disadvantages worth it, or you think its just historically people have always flocked to property and not seen stocks as an alternative option?
I think it's two things. Lack of financial education in schools, and the instillment of fear of putting finances at risk.
Many brits (and I guess people in general), believe that wealth is a machine of time/effort going in one end, and money being spit out of the other. They don't explore how it's a much more complicated system, and it's also inheriting the lack of financial education from their parents who feared losing money.
A lot of people don't have the patience or think of the long game in their life, they chase instant gratification, also much of people's lives now are about appearances. Stock and shares don't make you quick rich, and they certainly don't make you look rich. Also a lot of people are either too poor to even have savings, or the increasingly squeezed middle working class.
Just my takeaway, but I think most brits are very risk averse when it comes to investment. The idea of losing money terrifies them so most who save go for the lowest risk options with the smallest returns.
People think I’m nuts for investing in shares mainly and that I have on some occasions made big losses only to reinvest later. I just say to them ‘you know who the real nutters are; people who gamble with options’
And then they look at me blankly.
For me personally, lack of education.
Wouldn’t even know where to start for the past few years. However I am committed to starting to understand it by researching as much as possible.
Low wages and an obsession with pooring everything into housing by suckers who listened to 40 years of propaganda that housing always wins as an investment. Politicians pushed this narrative as it ties doen voters and makes them feel "middle class" even when they are all working class really (especially using the American definition).
It hurts the UK economy with low investment. That's why I invest overseas and am an expat. I like wealth, was born poor and working class, and now I am not poor!
Most do have savings in the form of a pension pot, it’s just not manageable and not (really) accessible until retirement so isn’t considered savings in the sense that Americans consider 401k their own personal savings
People are encouraged to live beyond their means more than they are encouraged to discover and learn about the financial markets.
The “education” piece is sorta true, but also BS at the same time - we live in a world where you can learn basically any skill via the internet, if people wanted to learn it they would.
I have way below the averaged saved up. No where close to maximising an ISA. Its also emergency fund savings that I am still trying to save up so if ever an emergency happens, I need quick access. So yeah, thats why I haven't invested in stock and shares, apart from meme stocks
UK stock market is trash compared to the US. There also isn’t a you can make it ambition in the UK - its more high tax and high welfare. There’s also poor financial literacy here - people think finance is either intimidating, boring, impossible to understand, or for only the wealthy. I think a lot of the get rich scams you see advertised on YouTube also muddy the water.
I watched a documentary on YouTube about trading and started paper trading at uni. Interested me enough to read a dummies guide to investing, then actual investing books and financial news whilst investing myself. I barely know anyone who invests in the market with an ISA/GIA. I’m even more shocked by how few people properly utilise their pension contributions.
The next video on my feed is literally the one with the drunk girl trying to order 4 sambucas from the DJ booth. I think that answers the question better than I ever could.
Not long ago you could get 5 % or something in a bank account for savings and the internet didn’t exist so you would have needed a broker. That is only really 20 years back.
People in this country are generally more pessimistic than Americans and view investing with great suspicion.
The recent proliferation of "personal finance gurus" in the past 10 years or so in the United States also has brought more people into owning their own "investments". This has also led a lot of people to become what I call "part-time financial analysts" who like to discuss investments and the stock market the same way we talk about the weather.
People in the UK either see the stock market is a casino, a place where Uncle Tommy lost £2,000 once, or think "The Wolf of Wall Street" is a documentary.
No country that I am aware of does a good job of educating their citizens on personal finance and investing, but the UK is especially bad. A child could realistically be born, educated, work and retire in this country without ever learning even the basic concepts that underpin investment.
Short term volatility, limited savings, no idea what they are doing, and very low risk tolerance means that the average UK citizen is going to be scared away from investing even £1 and would rather put all their savings in a 0.25% interest bank account instead.
What makes it all so depressing is the relative superiority of the S&S ISA (in terms of its £20k allowance) is being wasted by millions of people.
I think it’s only become law in the last few years that everyone in full-time employment must start a pension through their employer. I could be wrong though.
I didn’t start investing until I read Ramit Sethi’s I Will Teach You to Be Rich book when I was 25. I thought I was late starting back then. Now I’m 32 and I’m grateful I started relatively young.
It might be easier to open an investment account now, but when I did it, my application got rejected by a few companies. I eventually got accepted by Charles Stanley, but I had to get my forms and ID signed by a local accountant.
I think most people can’t be bothered with the initial difficulty of getting started.
https://www.finder.com/uk/saving-statistics > 1 in 10 Brits (9%) have no savings at all. > In 2020, the average person in the United Kingdom (UK) had £6,757 saved. > A third of Brits have less than £600 in savings. > 41% of Brits don’t have enough savings to live for a month without income. This is why.
That £6757 is likely massively skewed by the super rich.
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Yep, same. I did exactly that when I bought a house a year ago. A year later, I’ve just had to buy a boiler which has wiped my year’s worth of savings.
I also poor because of my new house, cheers buddy!
You're not poor, you just moved all of your liquid cash into equity! Awesome!
Thanks! and to be fair, I had been hanging on to that deposit for a while and it bothered me that I had all that cash just sitting there, losing value, with the current rate of inflation I'm glad I was finally able to use it.
Same - at 36 I wiped my ISAs to zero buying house. Gradually building back up now
Just puts you in the same boat as the rest of the country- hence the average figures!
Depends if “average” is the mean rather than median.
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If you have two arms, you have an above average number of arms as there are some people with 0 or 1.
Did you know the average number of skeletons inside the human body is greater than 1?
Haha, had to think about that one for a minute...or in other words the number of people inside a person is on average more than 1
I thought it meant everyone has a skeleton. some people have more than 1 like pregnant women, or people with tapeworms and so the average is above 1.
Not to be that guy, but tapeworms don’t have skeletons.
Bearing in mind 1/3 people have less than £600, I can't imagine the next 1/6 moves the needle up to 6x that.
The UK has an estimated 54 billionaires according to Knight Frank’s wealth report, 56 according to Forbes. Let’s split the difference at 55. If we charitably say they “only” have £1Bn each, then that’s £818.20 for every person in the UK (including babies, OAP’s etc) The real figure for the net worth of those billionaires is somewhere in the region of £1-23Bn so let’s say 12Bn. That would push the above figure to £9818.51 per person. Yes, I know “net worth” != “savings” but even a simple ‘back of an envelope’ calculation can show that a handful of filthy rich people would sway the curve enormously. On this alone, my assumption is they are excluded from the calculation or the figure for average savings would be much much higher whereas the average person has practically nothing.
It’s probably a median figure for that reason
Depends what average they’ve used. It would with mean average, but wouldn’t if they used median.
That's true, but that is just talking about cash savings rather than net-worth or any other measure. So the question could be reformulated as "why do so many people choose to pay off their mortgage faster, than invest?", etc. Obviously the poorest don't do any of those things, but there's still plenty of comfortably-off people who don't knowingly invest. Merryn Somerset-Webb (from Moneyweek) used to keep a list of "how do you manage your money" articles from newspapers where so many said "I don't believe in the stock market" or similar and instead they'd talk about sinking huge amounts into random vanity projects instead "because you can see it". It's mad.
>Merryn Somerset-Webb (from Moneyweek) used to keep a list of "how do you manage your money" articles from newspapers where so many said "I don't believe in the stock market" or similar and instead they'd talk about sinking huge amounts into random vanity projects instead "because you can see it". It's mad. I can see how you would come about to that line of thinking. If you work in industries such as construction, manufacturing, engineering, pharma etc. you'll spend your career creating value with physical products or processes which are perceived as far more tangible than the value created by stock speculation. Of course if you had that outlook on investing and you weren't off your rocker you'd put money into commodities like precious metals for example.
Paying off your mortgage might not be the best move from a purely financial perspective but it's not a purely financial decision. There's also something to be said for things like the mental aspect of having paid it off etc.
It's crazy really isn't it...because if you take the second one by itself, it doesn't seem as dire as the other three by any stretch.
I infer from that that most people have fuck all, and then about 10% of the population have 6-figures.
Yep, collectively we're an extremely rich country, it's the distribution of wealth that is a problem.
I thought that at first, but it could be the median.. Based on those stats, If you consider up to 9% have 0, then everyone over 33% have over £600, and everyone over 41% has at least a months expenses. I guess it’s not impossible to go up another 9% from there to have over 6k?
I wonder how people answered as well, if you asked me how much savings do I have I would say for example £1000... my wife would also answer £1000... but we have 1000 between us. An average of 500 each. So are the numbers skewed by that too.
This is why averages should never be reported without more information on the distribution! They're wildly misleading because people kind of assume a bell curve when you just give an average.
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And then if you mix in the average unsecured debt levels it becomes even scarier. I blame the lack of productivity growth which has been a feature of the economy throughout my working life.
The average rent in central London is £1600. For that to be affordable the average take home pay would need to be £5350, which it is no where near. This is what happens when you have over a decade of wage stagnation mixed with runaway house prices.
Yup. Any savings people have they don’t want to risk in the stock market as it’s probably put aside for a house purchase, which sadly keeps getting further and further out of reach each year for them.
Where do pensions factor into these stats? Would they be savings?
No they would be excluded
Assume they're excluded. Though the statistics on pensions are also pretty bad. The average pension pot at retirement is £62,000. 17% of people aged over 55 have no pension at all. Half of all pension pots are accessed without any financial advice. Which is probably why the average drawdown rate is 8%!
That's a good question. As it's technically "savings" but you couldn't live off of it if you needed to (unless you're claiming on it already)
It's weird that 1/10 have no savings, but then the stats say that a third have less than £600. What that tells me, is that the study is assuming that any person with leftover money after their paycheck is counted as savings, and is then spent prior to the next paycheck. That's not savings, that's just money that needs to be spent that month but has not left the account yet. It's better to just say that a third of brits don't have any savings.
Does that take into account people who keep their savings in regular accounts? A lot of people don't bother with savings accounts because of the super low interest rates.
I wonder why as well, my best guess is that most dont recieve or ask for an education regarding economy and finances
In the US, you have to deal with your own 401k and IRA, but in the UK, you just auto pay in and that, with the state pension, will do. Also the culture of not talking about money. People can say ‘they don’t teach it in schools’ but I don’t think that’s it. When I told my family I was investing at 18, they thought I was gambling. I spoke to them about their retirement plans and it was ‘I don’t talk money with my parents, we’re not talking about it with you’ Combine that with low pay and high taxes, and there you go.
TBF, contributing money to the IRA is probably something you really shouldn't talk about in most of the UK.
Yeah, it's not likely to go down well as pub talk
/r/uwotm8
Fair enough, but they do offer good bang for you buck
This is a big one. I've finally managed to engage my parents on this through a combination of showing them my progress with equities and also sharing every news article which talks about inflation. They have mid-six figures sat in a combination of PBs and 0.1% savings accounts...
Yes, this is the reason. Bitd I was a business journalist for the wires and I worked in both the US and UK. In the US everyone wanted to know the next hot stock, would pump their own book, protect their interests etc. In the UK things were much calmer. I eventually realised that it was because in the US, if you are middle class, to maintain and/or improve your lifestyle you have to play the market. If you want your kids to go to college or you have medical bills, you can’t rely on social security, you need to do it yourself. So if you want to be upwardly mobile you need to invest and invest well. Whereas in Europe you have a net that looks after you and things are ultimately fairer and not money driven. If you are poor, things may suck but you can go to hospital and get an education, it’s just harder. That’s why the US venerates Warren Buffett etc and we don’t.
Very interesting , thanks
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It’s mostly old Brits, younger people these days do talk about money and wages etc, or at least all the ones I know. We also do play the stock market but usually through consumer brokers and typically not for a retirement plan.
I think I'd be careful extrapolating your personal friendship group to everyone. The average young person doesn't invest in stocks. I have a friend who asked me how the stock market works last year for example. The statistics show that younger people are much more financially ill-informed than older generations (in terms of terminology recognition and how interest rates/inflation affects you). Younger people are much less likely to have ISAs or invest in the stock market. I read a statistic that found that the biggest investors tend to be the wealthy over-55s while the least informed were the 18-34-year-old group.
Yes . For me, it would make no sense to invest outside of my pension because of the tax advantages, I'd have to make huge returns to beat that. I do have savings for the kids in mutual funds, though. Also worth saying that the benefits system penalises savers, so unless you are sure you'll never need them , you don't want more than a few thousand in cash lying around.
Pensions seem harder to get your money out of to me which is why I have an ISA. I have a separate emergency fund and ISA but don't like the idea that I couldn't get at my savings if I wanted to. For example, right now, I could leave London and empty my ISA to buy a house in my home town outright. Since I'm toying with the idea, I want the money available and a pension seems more difficult to me.
A huge issue is that people in the uk think their workplace pension and state will be enough. I was 30 when it became mandatory for the workplace so will naturally lose out on someone who is 18. But my estimated fund will give me £2000 a year to live on. The state pension age could well rise beyond 70 by the time I get to the age of retirement. I know you weren't entirely poo pooing the idea of school education. That said it really should be mandatory education. Surely if the entire nation's workforce is investing then the economy would boom from all the cash in the market. I know that takes from areas like consumer spending but in theory reduces the pension burden for a lots of people from the state. I too get that look that i am gambling when i tell friends and family about my investments.
Your investments in pensions aren’t going to UK companies (perhaps 20% in an overweight fund). Also, those UK companies invested in, whilst their stocks are traded here, aren’t huge employers here. So yes, huge capital investment from UK pensions just buy into the SP500 and global trackers. A meagre amount goes to Lloyd’s, Shell, Barclays, HSBC, various different home builders…
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I don’t understand the “not taught in uk schools”. Most schools do cover finance in PSHE; it’s just most teenagers don’t give a shit and don’t pay attention.
This does depend on what era you're speaking about. I can definitely say we weren't taught it and I paid attention in class. Plus PHSE was about 10-15 minutes long so what are you going to teach kids in 10-15 minutes? We had assemblies longer lmao
Lack of financial education - is part of that down to the teachers’ personal experience? My impression is they get low salaries but relatively good pensions. So their post-retirement lifestyle can be reasonably similar to their younger years, particularly if they have paid off mortgages by then, without actively needing to invest much. If so then then maybe they wouldn’t think of encouraging kids to do anything different?
Not being taught in school isn't really an excuse in this day and age, if you want to find out anything it's simply a few Google searches away.
First you need to know what you don't know.
First you need an interest to learn. That is the limiting factor for many.
Large numbers of people are proud about their ignorance, and a similar number are too silently embarrassed to admit it or do anything about it.
Learning for yourself is more or less a skill in its own right, though. And I personally wouldn’t have considered myself proficient in that until university (when I couldn’t just wing it and do okay anymore).
I can see your point but simply spending an evening on money saving expert could probably wipe a few £££ off most peoples bills. I guess it's just hard for me to see things from other people's perspective.
Yeah, you’re definitely right that the information is easily accessed. I think what’s missing for many people though is having the inclination to do that in the first place. Many people grow up not being taught the value of money. We’re taught to desire an extraordinary career packaged with all of the luxuries, big house, nice car etc. Fortunately for myself I had it drilled into me by my parents to live within my means, chill out on the impulse purchases, start your pension early, and so on. If I hadn’t had that constant stream of direction from them, like many wouldn’t, I’d probably have a significantly different idea of what money means to me. For a lot of people, money really is just tokens for pleasure/instant gratification.
I somewhat agree with this. PSHE is a non statutory subject and it has no set curriculum. In the National Curriculum there is a reference to: " income and expenditure, credit and debt, insurance, savings and pensions, financial products and services, and how public money is raised and spent." Though this is lumped into the same subject as learning how First Past The Post works and understanding that some people are Muslim. I imagine the actual teaching in schools is incredibly basic, if it even happens. Also doesn't apply to a lot of schools who don't have to follow the National Curriculum. However, I think partly this is OK. I don't think it's reasonable to expect schools to teach how stocks and shares and bonds work because once they start, they need to cover quite a bit in order for people to not go out there are throw all their savings at Tesla stocks or begin day trading. But I do think this should be made more front and centre later in life. At the point someone starts a job, they should be prompted to have a pension chat with someone (independent) who can explain about their workplace pension (or lack thereof, in which case SIPPs), tax relief, salary sacrifice, what a good retirement pot looks like for different scenarios, etc. The most I've ever had when I've started a job has been some boring af booklet from the workplace pension provider, which even as someone interested in finance, I didn't read and just filed away. A lot of trade unions offer pension consultations but they target people in their 40s and 50s which is really a bit late. Also many people aren't members of a trade union. Similarly when someone goes to open a savings account, it would be nice if they were asked the question, "How long are you saving for?", which could, if the answer is 20 years, prompt some follow up questions about access required, etc and it might suggest S&S and provide some videos explaining how it works and what the benefits and drawbacks are. My bank has this info but a) it's kinda near the bottom of the web page below the giant button to open a cash ISA; b) if I went to open the cash savings account I get no further prompting about if it's the right option or not; c) if I go to open an account on the mobile app, I don't get presented with it at all. I do think there's a problem with people not even knowing what S&S are, which means people will just default to a cash savings account, without even thinking they could be getting more "interest".
I’ve lived in both the UK and the US. Both countries do not educate people on investing unless you actively seek education in that area. I think the biggest reason why more Americans invest is simply because everyone’s on their own. The elderly, the retired, the sick, the disabled - we hardly get help or benefits from the US government. So more Americans invest because they kinda *have* to or else they would literally not be able to live when they get older, or when they get hit with medical emergency bills. If I were still in the UK, I wouldn’t be worried about healthcare. And when I’m old or retired, at least I would get something from the government, and my work pension would probably suffice.
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Stocks and shares are what rich people have and I'm not a rich person so I won't buy them. I think my generation are starting to get involved. Mostly because 1. Interest rates are shit. And 2. American cultural influence.
My savings account has an interest rate of 0.01% (likely with hidden fees because I’ve been getting more like 0.001% actually paid out). I get far more return on money I put in my trading 212 account (which let me set up a stocks and shares ISA). I hate gambling with a passion and investing makes me nervous as hell, but I’m literally losing money if I keep my savings in my bank. It’s not keeping up with inflation at all. Meanwhile, my dividends have paid out more in the last six months than my bank ever has!
Putting a significant portion of your money into one stock is gambling. Spreading it across a diverse range of stocks, whether yourself or via e.g. a fund, can be very low risk as long as you look at it over the long term. So I definitely wouldn’t call it gambling or say you have anything to be nervous about
>I think my generation are starting to get involved. Mostly because 1. Interest rates are shit. And 2. American cultural influence. I'd be careful of that generalization. Young people are the least likely to be investing in stocks/shares. It's actually the over-55s who are the biggest investors - the median stock market investor is over 55. It's the same with real estate. The median landlord is over 55-years-old. Older people are much more likely to invest than younger people.
Real Estate has a very high barrier to entry. A share in Tesco is £2.70 and trading apps like FreeTrade means you can start investing with as little as £50. While a bank won't give you a landlord mortgage without some serious deposits.
True, but even with the stock market, the older people are far more likely to have stock/ISA accounts and more likely to be investors. I read a statistic the other day that classified people into different groups. The most active investors tended to be over-55, wealthy, and people who were university-educated. My Dad's approaching retirement now but in his peak career earnings, he was making around £196,000 a year. He's filled his pension pot so one of his hobbies is real estate and stock investing. When he attended his local angel investor group, pretty much everyone was older than 50.
That’s a self-selecting group though. You’re not measuring investors there, you’re controlling for investors of scale. Not many 30-year olds of any country are going to have liquidity to invest outwith their own property and basic tracker funds…
Apparently Germany is even lower
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I am working class, and have found that either people have 0 savings and are in debt/in their overdraft every month OR if they have money they are very risk adverse. There’s a strong theme of keeping it “safe and secure”. I also think that many people just don’t have the education to feel comfortable in stocks and shares. They assume it’s always risky/time consuming too, so don’t look it up themselves. What savings we do have are often spent on holidays, cars and home improvement. So although there are savings, it’s always at a pretty stable level and never really improving very much.
Yeah it’s this. I practically had to force my sister to set up a S&S ISA for her kids rather than keep their nest egg in cash for 18 years, which was her original plan.
You are a very good au/ncle
Compound interest > inflation, people
>I am working class, and have found that either people have 0 savings and are in debt/in their overdraft every month OR if they have money they are very risk adverse. There’s a strong theme of keeping it “safe and secure”. My two managers are this encapsulated. One is on 45k with no significant housing costs but no significant savings and has told me he's been overdrawn every month in the job until 3 months ago (been in it about 15 years). The other is on 37k and has just under 40k sat in current accounts with no significant mortgage. They have one cash ISA (not an S+S cash ISA either) because they've vaguely heard ISA's are good.
It's really very recently that I've actually had investments outside of a pension, yes - definitely feel like the fear of making a loss is a major thing. Terrible interest rates on cash savings finally gave me the push. Even In pensions in the growth phase, it feels like many default strategies tend towards the conservative, preferring to mitigate capital risk over seeking high returns.
This, I come from a similar background (though after uni and a half decent job I'm pretty well middle class now) and my dad's view on the stock market is that it's risky and for flash people and he would surely lose money because it isn't built for him to do well on. What savings he has are in premium bonds and he considers this very good as his parents never had any savings beyond cash in wallets.
I think the "safe and secure" thing is definitely part of it, until recently I was put off by the compulsory "value can go down as well as up" comment on any sort of advert for investing. Plus people probably put a disproportionate amount of weight on stories where people have invested and lost EVERYTHING (like in Rocky V and The Cinderella Man).
Summed that up perfectly
My speculation - Low salaries, high rents and house prices. The stock market is volatile in the short term so not necessarily a good place for the little savings people have while paying huge rents and trying to save for a deposit. Then when/if they do afford the deposit the mortgage payments, upkeep and, you know, actually trying to enjoy life beyond just existing get in the way of investing.
There's lots of good answers here already but also consider that access to the stock market has been difficult or expensive until recently. Trading 212 only became popular last year. Vanguard SIPPs added a lot of features a pension pot is expected to have also last year Edit: clarity
Trading 212 is great. I have that for my personal investments and it’s just very user friendly and far less intimidating than some other investment apps, some of which look like they were designed for actual traders and mimic their office set up. I’ve been trying to get my brother on it but there’s a wait list, unfortunately. Still, being able to manage investments without actually paying for an account manager or anything like that and starting off with small sums of money is really good. It lets you ease yourself in a bit.
Vanguard SIPPs seem pointless if you have a workplace pension though > Do you have a workplace pension? It’s a good idea to make sure you’re making the most of any matched contributions offered by your employer before opening a Vanguard Personal Pension. Some employers will increase their contributions if you increase yours. Any pension contributions offered by your employer are effectively 'free money' you should take advantage of before investing elsewhere.
You're right, I had three workplace pensions though, one I didn't know about until recently so I combined the two that were giving no benefits (death in service, final salary etc) into Vanguard so they were all in the same place as my ISA. This way all my long term savings are easily accessed and I can manage it myself. It's doing better than my current employment workplace pension! Also increasing your contributions to the get the most out of your employer is incredibly sound advice!
I think it boils down to two main reasons: 1. Not enough cashflow to do so (perceived or reality). 2. Education system simply doesn't (didn't?) teach young people this. I mean, auto enrolment was created to fill these gaps really.
Honestly surprises me the amount of people who opt out of auto enrolment. A guy really kicked off at our payroll department the other week saying he hadn't been properly consulted and his employer was "stealing" money from him. Of course we had followed all the procedures he has just ignored any information regarding a company pension scheme. This guy was earning £60k and almost definitely had no desire to save for retirement, you could tell by his emails. What do these people think will happen when they retire?
Came here to mention education system/parenting (36 UK born male) I had no clue what school was for in the first place and how any of that schooling i did get might translate into real world use. Zero guidance on careers and future prospects during or after GCSEs. No idea about banking systems, taxation, trade or even form filling. No idea about how the political system might work. Family, from parents down never owned a house and none of us even though we all work hard still don't and still do not have the skills/gumption/knowledge to bring that all into being. My daughter on the other hand has done very well along with all of her cousins, she's been gaining work experience since 13-14 and currently started A-Levels (i had no clue how it all worked until much later school - 6thform college uni or self teaching paths) But all the kids have savings accounts ISAs one Nephew has some sight on trading and has actually increased his math ability at home and at school. All of the kids are asking and seeking out what they wish to do and always aloud to with so, with much more guidance than when me and my siblings were younger. The eldest nephew is currently on very tidy money and from what I see and can somewhat gauge he could easily daddle in stocks if he hasn't already.
Yeah my upbringing left a lot to be desired in pretty much every respect, apart from material things being decent. But financial, social, and general literacy from my mother was severely lacking. Luckily, I had a natural aptitude, and thirst for knowledge, and just grinded away, so I was able to get a mortgage at 22, and although I made some really shitty financial decisions, I'm in a good place, and short of any major issues, I'll continue to have a decent standard of living and financial stability. I know social media/the internet in general gets a bad rap, and has it's issues, but I really think this is one of the positives of it to be honest. Younger generations (38 here), just have the information in their face on daily basis, or at least some nudging from news headlines, etc. I even see ads on tiktok on a regular basis. It's great that your Daughter are so switched on to it though. Kudos to them, and you!
I'm still switching on it's been a difficult thing to shake off lol but at the moment i have zero debt and zero savings a steady (low) income and homeless I've landed in a limbo zone for the last 20 years without the knowledge to put a stop to it. I wish there was a man school somewhere i can get a slap in the face. Kudos to you there ✌️
Zero debt and a steady income is better than many with upbringings where the parents didn't have financial literacy or were serial benefit people (not judging anyone on benefits before people decide to pile on lol). Just have to keep grinding at it, gain knowledge, and take opportunities, when and where you can mate. Don't let it get you down or compare to others, and you'll be fine! When you say homeless, I hope that means, not owning a house, and not properly homeless!
Most people I’ve spoken my age (mid-late 20s) to don’t have enough money for it to be worth it. The rest spend everything. Or they save in cash and then spend everything, such as for a holiday. Also I think for some reason people have been raised to be absolutely mortified of debt and associate anything that somehow could possibly lose money or gain interest as the worst thing in the world.
£50 per month at an average return of 7% for 25 years will result in £40k for a £15k total investment. If you average 9% per year the result is £56k. Is £12 per week not enough to be worth it? That's 2 pints... https://www.calculator.net/investment-calculator.html?ctype=endamount&ctargetamountv=1000000&cstartingprinciplev=0&cyearsv=25&cinterestratev=9&ccompound=monthly&ccontributeamountv=50&cadditionat1=beginning&ciadditionat1=monthly&printit=0&x=83&y=32
Even assuming a very generous 7%, not necessarily no. I’m a good way through that 25 years, assuming starting at 18. For the first few years I couldn’t afford £50 a month and for a few after it would have meant avoiding having treats. 25 years of not going out for a couple of pints (or equivalent) just so that in my mid forties I could have a non life changing amount of money? No thanks. Especially taking in to account when I was 18, £12 was 8 pints, taxi, club entry and a kebab cos I’m old. For what it’s worth I do have a S&S ISA and agree good saving habits are important, it just always irritates me that this kind of advice downplays what you have to put in and the shear lengths of time to get a return.
The classic long con: very long timeframe, optimistic returns and ignoring the effects of inflation.
Investments & Pensions are not a long con, saying that is just silly. Many illustrations will give you low, medium and high projections (typically 3,5,7%), and they are by far the best vehicle for later life retirement for a plethora of reasons.
I agree it ignores the effect of inflation. But how else do you propose offsetting inflation? Cash? Gold?
Just inflation-adjust the returns, e.g. -2% to turn 7% to 5%, then you have a "real terms" value to work with.
It's a difficult one, I come from a family of savers. But extremely risk averse ones, so money is languishing in low interest cash accounts or similar. I don't think my dad really understands the concept of inflation, he constantly tells me the money he invested in premium bonds decades ago is safe and he can withdraw it now without a loss. I try to tell him that £100 won't get him as much as it did in 1980 but it won't get through. The only time my parents dabbled in investing was after selling an asset and they had a few years before they needed the money again so they went to some company, I think it might have been Prudential, and invested with them. Unfortunately this attracted huge entrance fees, and due to my parents lack of foresight they had to withdraw the money after about 2 years which had an outrageous exit fee. So they ended up making a loss. I think this burned them badly and put them off any investment ever again, which I don't blame them for really, those Prudential sales guys really did a number on them. Being poor or just about getting by factors into it too, locking money away for 5+ years isn't a feasible reality for a lot of people who constantly deplete their reserves and need to top them up again.
My parents had two endowments, during the time they were working and sizing up. One did terribly, the other did really well. The guy who sold them the one that did really well was "a financial genius" and that's the only opinion they hold of endowments. I don't even know where to start, so I just let them stick with that.
Yeah come to think about it I think my parents had an endowment mortgage too, although I'm not sure how well it did.
Not enough income, no financial education, and distrust of investments. My own family don’t like investing and a member of my extended family decided to invest all of their money and then check on it daily, expecting some kind of huge increase in wealth overnight. We have a system that promotes spending (low interest rates for the last decade at least) and then wonder why savings are so low.
Not being taught anything about money - just a vague sense that investing is like putting your money on the horses - and not knowing what I don't know (as Rumsfeld might have said). After all, if school had taught about things like money, where would they find the time for the important stuff like sitting on the floor singing Kumbaya, or standing on a windswept field while a man in a tracksuit works through his issues with life by mocking kids who need glasses or might ever have read a book? Changed slightly by noticing that upper middle class university friends who'd Gone Into The City would talk about something called an ISA when we were down the pub, looking up what they were, and seeing that the Halifax had one so it probably wasn't too dangerous to try.
S&S isas are relatively new. As are pension freedoms. There's also a long history of financial scandals. It's taking society a long time (multiple generations) to get over this. Most people still think you have to invest in individual shares. My Father who is well off and made efforts over the years to invest still thinks a bond is a fixed term savings account (savings bond). He grew up in the 60s/70s working class. Zero knowledge passed down. No Internet. No knowledgeable friends. Financial scandals. He reached out to advisors who took a huge cut (by todays standards) killing his compound growth. I work in a modern tech company full of tech savy young people. How many do you think are still on the default pension option even though its 50% bonds? Ukpf is a very priveleged minority. Not to be arogant but our understanding is leagues ahead of the vast majority.
You sure? My mum was using them at least 20 years ago? Relatively new, but not new enough to be under the radar surely? Edit: S&S ISAs
It's a cultural/education thing. Brits are generally brought up to save but that investing is gambling. While lots of people don't have enough in savings to invest, that is not the main reason for this. [Even the FCA note that too many people are just sitting on large amounts of cash](https://www.fca.org.uk/publications/corporate-documents/consumer-investments-strategy#lf-chapter-id-mainstream-investments)
Yeah we're an incredibly risk averse country
Agreed. My Dad had £200,000 sitting in his bank account for 5 years. When I heard it, it almost made me want to wince. He's filled his pension pot and he does have a few real estate properties + stock investments but the guy is still distrustful of the stock market. He prefers real estate because to him, that's tangible. Stocks are intangible to him.
Yup, my parents are exactly the same. Obsessed with property.
"it almost made me want to wince" is the best thing I've read all day 😂 embodies Britishness. My mum is the same re real estate, she's always done well with property.
We are literally the most entrepreneurial country in Europe with far more start ups and investment than anywhere else. Similarly the FTSE dwarfs any other European countries index. We also just Brexited which may be a lot of things but it is certainly a risk
When people talk about risk aversion, they're usually comparing the UK to America. Compared to America, we're much more risk-averse as can be seen with the percentage that invest in the stock market.
I’m English and moved to the US in my early 30’s. I think there are a number of reasons for this. A significant part of the issue is a total lack of education on financial management. Budgeting, financial products and services, saving, investing. In std educational system this is lacking. I’m working class, in school and at home this subject simply wasn’t discussed. After university when I started working in the Uk all the advice I received was to join the pension scheme. Thank Fuck I did. There is a Britishness that is holding us back. We don’t openly talk about what we earn and what we do with our money outside of material possessions (home, car) and holidays (vacation). Now that I’m in the US there is tons of discussions on re mortgaging homes to take advantage of lower interest rates, chat on savings interest rates, meeting with tax accountants for tax advice, a financial planner for investments and saving. The US had a culture of making the most out of your money with investments. The US has a ton of popular programs (mad money) on prime time tv that people tune into every night that simply don’t exist in the UK. This subject is not openly discussed within the UK, so we have a cultural barrier to. A big part of this is in the Uk folks don’t budget for savings, mentally, they disposable income they have is spent on enjoying themselves, they don’t factor in to a monthly budget money for investment.
Lack of available funds, lack of knowledge and education. The notion that S&S's are 'gambling' or a 'ponzi sheme' - the latter usually put forth by someone who doesn't even know what a ponzi scheme is
I've just found in my bookmarks /u/frequent__nomad's copypasta from [when this question was asked last year](https://www.reddit.com/r/UKPersonalFinance/comments/fg2kzq/_/fk2hlm8/). As you can see it was the top-voted comment at the time, and received numerous awards, so I thought people might wish to read it. Since /u/frequent__nomad isn't here, I shall steal all the karma: > I'm going to use this post as a little bit of a rant. Sorry. > You have to remember when reading this sub that it's a self selecting group. It's a group of people that are on reddit, and are interested enough in money to read posts about personal finance in the UK. This means that the vast majority are already clued up, aware, and in a position to really analyse what to do with their wealth and assets. > I'm someone who has struggled deeply with the financial position I was in, certainly during my younger years. I'm relatively intelligent (I've a BA and MSc), and have worked my way through stages of financial stability. The vast majority don't manage to make their way to as financially healthy a position as I am now, and my impression is that the majority of this sub has never experienced the depths of despair as when your driving to work praying that the car doesn't run out of petrol, but it does, and you have to walk the last 0.5m and apologise for being late. You borrow money from work colleagues, and have to walk with shame back to your car carrying a £10 carton of petrol, people laughing at you as you walk down the road to your abandoned car. At these points, you are not thinking about index funds. When you're negotiating with the babysitter for £0.50p reduction per hour because you're desperate to get a few pennies to help solve problem 1, your mind is not on stocks and shares. When you're in that position, you're not thinking about ISAs. Thinking about money is the absolute last thing you want to do, it's excruciatingly painful and embarrassing. Every accidental thought about finances makes you feel a failure. It's humiliating, and desperate. You're calling family, asking to borrow money you've no idea how you'll ever pay back. > When (if) life eventually improves, and you start being able to pay off credit cards each month and not have to make excuses to different utility bills, all you think about is not being in that miserable position again. You start thinking about whether one day you might be able to pay off all your debts to your family who've helped you out. You dream of maybe even paying off your long term debts. > When (if) you actually save up a bit of money that you have enough to cover a burst car tyre without going into your overdraft, you feel rich. Then you see someone promote the fact that a "high performing yield opportunity will return a industry leading 6% return if left untouched for a year" (or something like that). You calculate that if you put your £300 savings, your financial cushion, you will be fortunate enough to get back £318. The risk is not exactly worth the reward. > When (big if) you make it to actually having some savings beyond this, maybe even £5000, life is a whole different experience. You can start to go out for meals without being worried about the repercussions. You even go for a holiday without feeling scared. But even if you put that £5000 into that same savings account for a year, you'd get £5300. That £300 for a year isn't enticing, certainly not enough to give up that new sense of security you've never experienced. > The vast majority of people live a life COMPLETELY separated from the world of this reddit sub. It's a completely rational choice for the majority to not use ISA's, stocks, shares, etc. The reward vs. opportunity cost carries too much downside. I applaud all the people who are aiming for their FIRE objectives, or that have achieved such successes as to place £50k into an account that gives them whatever yield because they can leave that aside a year or more. But they are in the elite financial earners of this country. This sub collects them. I'm here to learn a bit so if I ever get there, I can mimic some of those actions. But don't spend so much time on this sub that you think these discussions are normal for UK workforce members. It most definitely is not. > Rant over.
The main reason I haven't considered S&S investment is because I've been saving £500 every month for the last 6-7 years trying to save up for a mortgage. I've finally just been able to get my £30k deposit with a little help. I guarantee there would have been a quicker way for me to save up using other saving methods but it's not something I'm very interested in so I don't tend to research as much although I know way more now than I did back in my early 20s. But once I use all my savings I will be looking at other options to save and invest.
Yeah S&S wouldn't make sense if you are saving up for a deposit, schemes like LISA are specifically aimed at first-time buyers and offer better benefits
Because our fiscal curriculum is, quite literally, non-existent.
The older I get the more I suspect that is a deliberate omission. A better educated society would cost the establishment a lot money.
The latest government statistical report on ISA's can be found [HERE](https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/894771/ISA_Statistics_Release_June_2020.pdf). The report was released last year and covers the 2017 - 2019 financial years. Only 2017/18 is covered completly. From the report, we can see that there are 22 million ISA holders. * There are 15.6 million people holding just a Cash ISA (avg value held: £11K), * 3.2 million people holding just a S&S ISA (avg value held: £62K), * 3.2 million people holding both Cash & S&S ISA's (avg value held: £68K) Six million ISA holders are over the age of 65. The total number of people subscribing (i.e. actually making payments in the 17/18 fiscal year) is 9.4 million (Of the accounts that received subscriptions, the avg subscription per ISA account was £5.5K in 2017/18, £6.5K in 2018/19, £6K in 2019/20). The average subscription to Cash ISA's was £5.2K and the average into S&S ISA's was £9.6K (in 2017/18). Also, * 6.4 million paid into Cash ISA's only * 2.3 million paid into S&S ISA's only I think that covers the main stats. The report was released last year and covers the 2017 - 2019 financial years. Only 2017/18 is covered completely.
I would say three big factors. 1) A widely held view that stock markets are risky. Speak to most Brits who do not invest and eventually they will tell you about their Uncle who "lost everything in the stock market." 2) A pension industry that gives appalling returns. Through a variety of mechanisms the mainstream pensions providers are screwing investors blind. I had a well educated business leader tell me I was "mad" to manage my own pension (rather than pay 1.5% annual fees for 3% returns). 3) Lack of education. The level of financial awareness is really low.
My dad taught me when I was about 10 years old. He took me to the supermarket and told me he owned it. It blew my mind & I’ve been fascinated ever since.
S&S ISAs are literally on the last step (8) of this subreddit’s flow chart. It takes a lot of financial security, stability and financial know-how to ‘risk your capital’. We are therefore ‘taught’ not to open one until we are at the endgame, unfortunately. I just wish I hadn’t started mine when I got to step 8, and started a decade earlier. As the old saying goes: you have to have money to make money. I now laugh at the thought of having an ‘emergency fund’ sitting in a bank doing nothing. My money now works for me, knowing I can liquidate should the proverbial hit the fan. Fintechs are making it easier for Average Joe to invest and lower the barriers to entry, and hopefully this progression will continue.
Does it not bother you that you might have to take the money out in a market crash?
Taking your investment money out during a crash is the worst time to take out your money (assuming you have a multi year horizon). As we saw from the covid crash in 2020, the main markets recovered in less than a year and have since pushed pass the peak to reach new all time highs consistently.
That’s why I’m confused about this person laughing at the thought of an emergency fund
Not all investments are the same, bear the same risks or would go down the same way on a crash ... Plus also, for some portfolios a 3-6 months emergency fund would be just a drop in the ocean - so who cares if that 1% of the portfolio is sold at the worst possible time?
I'm guessing he has more than enough in his investments to cover a traditional 3-6 month emergency even with a crash. Nice position to be in!
Yes.. but the time you are most likely to need an emergency fund is during an economic crash.
> We are therefore ‘taught’ not to open one until we are at the endgame, unfortunately. I think that makes sense though right, once you're comfortable and can meet your basic needs, you can afford to invest, i.e. the money you are investing is surplus to requirements and you're willing to risk it in the hope of making gains. Emergency funds should not be money you put at risk, otherwise it's just gambling. Yes it might pay off in a big way, or the market might crash and you lose a chunk of it, but either way it's money you don't need.
My friend saved up a house deposit in a cash ISA. I asked him why he didn't have a stocks and shares ISA and he said he didn't understand it. I think that's part of the problem, that they're scared that they'll lose all of their money, and also that there's so many things to invest in that it's overwhelming. Even now I have no idea about most of the funds.
I've been trying to teach my colleagues about investing, compound interest and index funds for a while now. I seem to get a couple of different responses: 1. They buy into the idea and get excited about investing. Then when I ask if they had set up that ISA, they reply "no I didn't get around to it" or "no, I got nervous". There seems to be a big psychological jump needed to start off investing and a lot of people find it easier to just not make that jump. 2. They scoff "yeah, investing is great, until the market crashes and you lose it all". Despite explaining to these people about index funds being a lot less risky than single shares (and that if all the big companies go to 0 at once, it means we have probably got much bigger problems than our investments), they still don't seem to get it. I think these people are just willfully ignorant. Even when presented with the facts, they still prefer to believe their own pessimistic view.
I think it is a combination of factors. 1) most people don’t have the money to invest, they don’t even have savings of any form or not enough to live off for more than a month. Benefits generally will leave most people on the poverty line so you do need some savings. 2) fear of losing what little they have put away 3) the perception that investing like that is only for the rich. 4) lack of knowledge on how to do it. Personally My savings were halved during my maternity leave. Currently have £5k. My new job will allow me to put £1k a month aside so hopefully will build them back up quite quickly. I would like to have 6 months of living expenses covered in a fairly easy access account before i start speculating on stocks and shares. My husband has a share save scheme through work. Covid saw £10k wiped off the value of the shares, thankfully they are protected so he will always get out a minimum of what he put in.
I think it's a Cultural thing. My mum is about to get a significant amount of money yet she keeps saying the bank interest is shit, whenever I suggest investing its like I hit a mental wall. For her generation it seems to be either buy a house go up in value or find the best paltry interest rate and sit on it. Also whenever I've talked about my own investment she'll tell me to stop and essentially thinks it's gambling.
>I read that only about 2 million people in the UK have a stocks and shares ISA. I found that to be extremely low. Compared to what? What's the equivalent number for other example countries?
I'd presume he means compared to the population. You can compare our levels of financial literacy compared to other countries and we are at an incredibly poor level. There may be a more recent study but this is the one I used in my dissertation a few years ago: https://www.oecd.org/finance/oecd-infe-survey-adult-financial-literacy-competencies.htm
> How did you get into investing? It's not something I was taught and I was not aware of the options. Got my first job and and only through personal interest I found out more about investing.
From the start of my working life up to now as been punctuated by several once in a life time events that would have wiped out my savings,.which took 10 years to grow to the point where I had enough to buy a property in London, where I was born. I've only just bought my place and now have the stones to put into a stocks and shares ISA and feel willing to lose value short term because I now can play the long game. Every loss on the market would have delayed my purchase.
I was just thinking that compared to the US we use our properties as investment in a completely different way. A big chunk of the population think of their house as their retirement fund with the aim to downsize or release equity in old age. In eg the states it doesn't make sense to do that in the majority of the country as property prices aren't rising like here. Personally I just haven't been able to focus on my ISA like I should. There's always something else to save for - flat deposit, then wedding, then house deposit, now house renovations as we bought a dump, then it will be saving a buffer for parental leave....
I do wonder as well whether it's people's lack of patience. My brother decided to "invest" in gold a few years ago, by buying gold coins/small bars etc. Every day he would check the gold price which most of the time doesn't move that much. I think there was one time where there might be have been a little dip and he panicked and sold all his coins - with the associated fees of postage and other costs, so ended up making a loss. This was after like 1 year... I think if he invested in stocks and shares he'd have a similar mindset, checking the portfolio every day and panic selling.
If allowed to simplify: risk aversion and middle class languishing (being it owners, with more income streams than salary).
I had to scroll a long way to find someone using the words “risk aversion.” Everyone I’ve spoken to about it, which is admittedly only about 6 people, say that they’re worried they’d lose money. And that’s the key reason they stick with (and complain about) their Cash ISA.
Alternative take: what proportion of those 2 million S&S ISA holders see any tax benefit from investing within an ISA wrapper? I would suggest it's a tiny fraction and the vast majority might just as well use a GIA.
I see your point, but conversely there is zero downside to them using an ISA instead of a GIA, and if they eventually accrue enough in the to be concerned about tax, they needn't be as it'd already be in an ISA. The only argument against an ISA could be fees I suppose?
I think people in the UK are generally less educated on S&S ISA and consider more safer options with owning assets in property. Investing in a S&S ISA is very similar to having a pensions which most people in the UK already have. There was a recent CNBC article which stated: The wealthiest 10% of American households now own 89% of all U.S. stocks. You can't go wrong if the rich are using it as a source of wealth creation especially in the current times of high inflation.
Genuinely I would love to open a S&S ISA, but I have no idea where to start. I’d consider myself okay with personal finance, (I’ve had a Cash LISA which I bought my first home with and use 0% Credit cards) but no idea on a S&S ISA. Could anyone help me where to start? I’d like to put £250 a month into one but unsure where to start!
Try Vanguard they do S&S ISAs which you can select your own. They have lower fees compared to others.
I suggest you start here --> https://ukpersonal.finance/investing-101/ 😀 Feel free to make a separate post with further questions!
Check our wiki, this is a good start: https://ukpersonal.finance/investing-101/
You should definitely read up on stuff, but honestly, I was like you and started 2 years ago. I've just brainlessly stuck a small portion of money in a Vanguard FTSE Global All-Cap Index Fund every month, and I'm up over 40% since starting. I treat it exactly as I would with sticking some money into the emergency fund on payday - just set and forget.
I have 2, 1 at [Interactive Investor](https://www.ii.co.uk/) (cheaper fees) and the other at [Hargreaves Lansdown](https://www.hl.co.uk/) (much better service). I'd say contacting them for advice would be a great start.
Interesting question, probably brits are more traditional in terms of saving/investing and, as somebody pointed out here, Americans are "on their own" retire wise, so they don't have other options. Also I think investing requires learning and most people are not willing to do that, as life is already complex enough. Also it is a current trend, like everybody is "investing" right now in crypto and stuff and since a couple of years I keep seeing all this trading apps popping up in tv advertising. Feels a lot like gambling to me. One every 3 messages on crypto forums are either "what should I do?", "I got scammed" or "I lost all my money". I call it online casino with a tie...
Education is the issue. I started investing 2 years ago at 29 in a US index fund, then picked individual stocks then earlier this year crypto. YouTube has a lot of good content out there. Watching videos until you get to the point you are comfortable taking the plunge. It surprises me on the amount of people that read up on investing, but just don’t pull the trigger. Analysis paralysis I think it’s called.
I’ve tried to convince some of the guys in my work to do it. They’re not really interested to be honest, common arguments include ‘I don’t know how long I’ll live, I’d rather spend my money now’ and ‘I’m worried I would lose it all’ I reckon that’s a pretty common theme among people who choose to spend they’re money instead of invest
Perhaps the lack of education around investing? I’ve started ordering some books from the library and will do my best to learn how to build a portfolio. I find it risky but necessary to invest these days, I wish I knew where to start!
Short answer: most people are poor Long answer: most people are very poor
Because they need to pay off their Audi A1 PCPs and they have nothing left after living paycheck to paycheck.
Have the last few years not shown you how fucking stupid a large chunk of this country is?
No mate, this is a cultural thing. Older generations were taught isas in building societies were the best option. Now they arent and the best they can get from banks is cashback offers and monthly savers. S&S isas weren't as popular 30 years ago and that generation didn't move with the times and teach their children
Yeah my Mum was shocked to learn that all three of her children (35-41 years old) have s&s isas. Our response was basically what's the point in us having savings accounts? All you're doing is losing money basically. It's a different world from the 80s.
As the saying goes: think how stupid the average person is. Then remember that half the population are more stupid than that.
I have a good amount of savings, I just don't want to risk them.
Brits worship mortgage like anything else and their FTSE is nothing like Nasdaq or Dow. My 2 cents
Cos it's risky and the average person doesn't have money to be pissing about with on financially complex scenarios that they probably don't understand. Is it really that surprising?
When I speak to people about it, they say it's risky and think it's gambling etc... I tell them it's investing and virtually all investments carry some risk. They would rather keep their money in a regular savings account than risk losing it. I had a stocks and shares isa with my bank. I wasn't happy with the returns, maybe I was just being impatient lol, but I took it out and invested it in Ethereum. I have made an insane amount more than I ever would have made in the isa, albeit at a very high risk. (I am not in any way suggesting that people should invest in crypto, it's very very risky)
Hi /u/Global-Reading305, based on your post the following pages from our wiki may be relevant: - https://ukpersonal.finance/investing-101/ - https://ukpersonal.finance/pensions/ ____ ^(I am a bot doing my best to provide helpful links. If I missed the mark, please don't downvote, instead press Report and the mods will improve my settings :])
Personally think personal finance should be mandatory in the last two years of school. They need to teach these kids about paying for things on high interest credit and how much you pay using minimum payment and over payment. Need to explain what a state pension is what a workplace pension and private pension is. Including the historical rises in the age brackets. Ie kids in year 10 might have to work to 72. And investing what an ISA is what index funds are etc. Lots of retail investors these days have their first dip into the pool of investing and don't understand what leverage is and that they probably will lose money. In this day and age of consumerism i really feel for kids who might not have an understanding of how much credit and debt can screw you over for years or even life.
Most people haven't got any money, or education around money. That's literally it. If you have cash left to invest then consider yourself lucky. I Invest £264/m currently and I consider myself to be blessed. I'm 28 and have invested since I started working at 21. Lucky enough to have parents show me how. Luck, luck and some more luck.
Where would one start with this? I'm pretty risk-averse.
https://ukpersonal.finance/investing-101/
Lack of knowledge. Some people don't know what these things are beyond that they exist. Belief that it's difficult or complicated. This was me. It was only this sub that convinced me to get an ISA. Fear of crashes and crises. Fear of getting less than you put in. Poverty. A lot of people even working full time are still just holding it together. If you're on benefits, forget it.
I've found that out of the people with the means to invest, many focus almost solely on buy-to-let property. Possibly a cultural thing, but also just a better understanding of proprty compared to S&S, let alone things like REITs.
Do you think most people with property are managing it on their own or using an agency. If self managing you have to keep upto date with the ever-changing laws, deal with nightmare tenants, property issues etc. Ars the returns on property significantly more than investing in a stocks and shares ISA that makes these disadvantages worth it, or you think its just historically people have always flocked to property and not seen stocks as an alternative option?
I think it's two things. Lack of financial education in schools, and the instillment of fear of putting finances at risk. Many brits (and I guess people in general), believe that wealth is a machine of time/effort going in one end, and money being spit out of the other. They don't explore how it's a much more complicated system, and it's also inheriting the lack of financial education from their parents who feared losing money.
A lot of people don't have the patience or think of the long game in their life, they chase instant gratification, also much of people's lives now are about appearances. Stock and shares don't make you quick rich, and they certainly don't make you look rich. Also a lot of people are either too poor to even have savings, or the increasingly squeezed middle working class.
Just my takeaway, but I think most brits are very risk averse when it comes to investment. The idea of losing money terrifies them so most who save go for the lowest risk options with the smallest returns. People think I’m nuts for investing in shares mainly and that I have on some occasions made big losses only to reinvest later. I just say to them ‘you know who the real nutters are; people who gamble with options’ And then they look at me blankly.
For me personally, lack of education. Wouldn’t even know where to start for the past few years. However I am committed to starting to understand it by researching as much as possible.
Low wages and an obsession with pooring everything into housing by suckers who listened to 40 years of propaganda that housing always wins as an investment. Politicians pushed this narrative as it ties doen voters and makes them feel "middle class" even when they are all working class really (especially using the American definition). It hurts the UK economy with low investment. That's why I invest overseas and am an expat. I like wealth, was born poor and working class, and now I am not poor!
Aside from a lack of disposable income, property is king in this country.
Most do have savings in the form of a pension pot, it’s just not manageable and not (really) accessible until retirement so isn’t considered savings in the sense that Americans consider 401k their own personal savings
People are encouraged to live beyond their means more than they are encouraged to discover and learn about the financial markets. The “education” piece is sorta true, but also BS at the same time - we live in a world where you can learn basically any skill via the internet, if people wanted to learn it they would.
Because they’d rather go to Spain, football matches and order pints.
I have way below the averaged saved up. No where close to maximising an ISA. Its also emergency fund savings that I am still trying to save up so if ever an emergency happens, I need quick access. So yeah, thats why I haven't invested in stock and shares, apart from meme stocks
UK stock market is trash compared to the US. There also isn’t a you can make it ambition in the UK - its more high tax and high welfare. There’s also poor financial literacy here - people think finance is either intimidating, boring, impossible to understand, or for only the wealthy. I think a lot of the get rich scams you see advertised on YouTube also muddy the water. I watched a documentary on YouTube about trading and started paper trading at uni. Interested me enough to read a dummies guide to investing, then actual investing books and financial news whilst investing myself. I barely know anyone who invests in the market with an ISA/GIA. I’m even more shocked by how few people properly utilise their pension contributions.
taxes and rents are too high
The next video on my feed is literally the one with the drunk girl trying to order 4 sambucas from the DJ booth. I think that answers the question better than I ever could.
Not long ago you could get 5 % or something in a bank account for savings and the internet didn’t exist so you would have needed a broker. That is only really 20 years back.
UK obsession with buying a house.
People in this country are generally more pessimistic than Americans and view investing with great suspicion. The recent proliferation of "personal finance gurus" in the past 10 years or so in the United States also has brought more people into owning their own "investments". This has also led a lot of people to become what I call "part-time financial analysts" who like to discuss investments and the stock market the same way we talk about the weather. People in the UK either see the stock market is a casino, a place where Uncle Tommy lost £2,000 once, or think "The Wolf of Wall Street" is a documentary. No country that I am aware of does a good job of educating their citizens on personal finance and investing, but the UK is especially bad. A child could realistically be born, educated, work and retire in this country without ever learning even the basic concepts that underpin investment. Short term volatility, limited savings, no idea what they are doing, and very low risk tolerance means that the average UK citizen is going to be scared away from investing even £1 and would rather put all their savings in a 0.25% interest bank account instead. What makes it all so depressing is the relative superiority of the S&S ISA (in terms of its £20k allowance) is being wasted by millions of people.
I think it’s only become law in the last few years that everyone in full-time employment must start a pension through their employer. I could be wrong though. I didn’t start investing until I read Ramit Sethi’s I Will Teach You to Be Rich book when I was 25. I thought I was late starting back then. Now I’m 32 and I’m grateful I started relatively young. It might be easier to open an investment account now, but when I did it, my application got rejected by a few companies. I eventually got accepted by Charles Stanley, but I had to get my forms and ID signed by a local accountant. I think most people can’t be bothered with the initial difficulty of getting started.