It’s pretty safe to say that the vast majority of parents want the best for their children and that most hope their kids will be healthier, happier and even wealthier than Mum and Dad have been. This is part of a larger hope or expectation, at least in affluent societies, that the human race is truly making progress and that each generation will be better off than the previous one. That’s the way it should be… right? Yet along with these hopes and expectations come fears that things aren’t getting better and are in fact getting worse, and that emerging generations won’t be better off after all.
Is it all downhill from here?
There is certainly no dearth of evidence to support a pessimistic view of the future. In its recently published European Health Report 2015, for instance, the World Health Organisation (WHO) warns that young Europeans may die at an earlier age than their grandparents if the rates of smoking, drinking and obesity aren’t curbed in the region. (The same WHO report noted that among the 15 EU nations, women in the UK have shorter lives than average.) And a major study earlier this year led by the London School of Economics (LSE) revealed that young people in the UK are unlikely to attain the wealth enjoyed by their parents’ generation.
The LSE study found that that the median household wealth – income plus assets – of people aged 25-34 is £365,000 less that of those 30 years older, and the study suggests that for many this gap seems unlikely to be bridged. The average 30-year-old of today would have to save £33 a day for three decades to achieve the average wealth of the current generation of 60-year-olds.
The lead author of the paper, Professor John Hills, cautioned that such discrepancies, in addition to the growing importance of wealth over income, mean that inherited money is likely to become more crucial in determining the financial fates of people born from the 1980s onwards. To make matters worse, wages are falling and this means that many graduates (of whom there are more than ever) may never be able to repay their student debts. Hills says that “the costs of the crisis have not been evenly borne and, disproportionately, young people have paid the price.”
Unless policymakers become aware of these factors and act accordingly, the future doesn’t look very bright for millions of young people.
Parenthood in later life means less time for saving for the future
Another factor that muddies the outlook for future generations is that an increasing number of people are becoming parents later in life. According to figures from the Office of National Statistics, the number of women in their 40s having a baby has almost quadrupled over the past three decades. In 1982, there were 7,466 births in England and Wales to women 40 or older – and the most recent available figures show that by 2013 the figure had soared to 29,158.
Presumably, the majority of older first-time parents are in their peak earning years and therefore in a better position to support a child than a starry-eyed young couple might be. (Whether they have the physical stamina to be parents of active young kids is another matter.) But a new baby can be a significant financial burden even for more affluent parents. Apart from any extra expenses they might incur to get pregnant in the first place if they’re past their prime fertility years (e.g., costs for testing, in-vitro fertilisation, etc.), older mums and dads have a shorter time period before retirement than do younger ones. And they still must concern themselves with putting something aside for their child’s future.
Many experts advise that retirement saving should be the top priority, because while you can borrow money for most other expenses you really can’t do so for retirement. Consulting with a properly qualified financial planner can help older parents make the right decisions, ensuring that they take care of their kids financially whilst taking care of themselves and their partner as well.
Is the best yet to come?
No matter how old or how young you are – and no matter what the gloomy prognosticators say – saving for your children’s future is still important, and every little bit helps. Fortunately parents in the UK have several good options. For example you can choose from various types of Child Trust Funds (CFAs) or Junior Individual Savings Accounts (JISAs). But again, since laws and regulations change from time to time, and since there are advantages and disadvantages to any savings plan, it’s wise to consult with a well-qualified advisor.
Although it’s easy to become discouraged by the indicators that things aren’t getting better, there is always hope for the future. As policymakers and individual citizens alike become more aware of what is going on we can all work together to make things better. And even though as individual parents we have a limited amount of control over the larger picture, we can take real and practical steps towards ensuring our kids have at least a fighting chance. But we have to act today, rather than just sitting around worrying about tomorrow.