Telling youngsters to save more is a waste of time
It’s been a sad 48 hours on twitter watching the wolf pack turn on Paul Claireaux for his cappuccino blog – where Paul postulates that a youngster could have a markedly better retirement for giving up a cappuccino a day and saving the money into a pension pot.
There are many other versions of this argument – it used to be done with packets of fags and NEST are trying it with their sidecar. All are versions on nudge with a sexy theme disguising a fairly tame idea – “save what you don’t miss”.
Unfortunately people do miss their coffee and fags and low-paid people don’t always stay in the sidecar saving employment. Anyway, the amounts saved rarely amount to enough in practice and the grand plan depends on things that don’t often happen – continuity, perseverance and the right set of financial assumptions.
Oh and if we can’t be bothered to give low-earning people the promised incentives to save, who are we to preach the value of saving anyway?
My problem with financial education is that it’s usually those that have the money teaching those that haven’t how to be like them – and young people don’t necessarily see people like me as role models. Even if they do, the last thing youngsters would admire in a baby boomer was his or her pension. Financial education is at heart paternalism and youngsters don’t take kindly to that.
There are literally hundreds of tweets on my timeline arguing about cappuccino pensions. What a waste of time – when that time could be spent on getting a better futures
Spending on a better future
The paternalism of financial education usually manifests itself in a demand for self-denial called “saving”. Telling people to save doesn’t go down well but showing people how to spend does – it is the basis of advertising and behaviourally it is a much more effective way of going about things. Spending on a better future begs the question – spending on what?
By a strange coincidence, I am doing three presentations today , which will all incorporate this message. This morning I’m talking with a high street bank on how to get millennials saving more, at lunchtime I’m talking with the Equity Release Council about helping older people spend their savings and this afternoon I’m talking with payroll people about promoting workplace pensions.
In all three talks I plan to focus on spending not saving and on making use of assets like pension pots and houses and work income to spend on a better future.
We all renters
We live on borrowed time, our lease of life expires not when we choose but when we are chosen. Many young people are renting and have no plan to buy, they own less and less, subscribe to more and more. Ownership is not even an aspiration for many millennials.
For younger people, the future seems out of their hands and they are determined to take control. We see this in their determination to reduce emissions and decelerate global warming. And if we ask people about their savings , they want to know where their money is invested and to take control of investment decisions. Once more – watch this video.
In a world where we cannot or don’t want to own, we can at least steward. The planet is ours to save, let’s spend on a better future.
Turning savers into spenders , spenders into stewards
Our time would be better spent showing people how their savings are invested and giving them the chance to make positive decisions on how their money is spent.
I mean by spent – invested, but people need to understand what is happening to their money after it leaves their bank account, their payslip – even their bricks and mortar.
Giving people a clear picture of what happens to their money is critical to keeping their interest.
Instead of issuing people with annual statements full of financial jargon and compliance warnings, we could be reporting on how money has been spent. The only fund manager I have known who does this is Terry Smith – and look how successful Fundsmith is.
And of course, when we have turned savers into spenders and spenders into stewards, we have changed the nature of saving for the better.
We do not need wealth , we need to pay the rent
This blog challenges the conventional view of pensions as wealth and replaces it with a view of pensions as a way of paying the rent. This is the new reality for many youngsters.
We should stop confusing the need to pay the rent with ownership, stop suggesting that we can dive into our pension savings to put down deposits on houses. We need pensions to pay the rent – not to amass housing equity,
We need to stop thinking of pensions as a means of becoming wealthy and start thinking about our responsibility to each other not to become a burden in later age. Investing in our retirements should be a deeply satisfying – socially responsible behaviour.
Appealing to the responsible instincts of young people is much more likely to win their hearts than appealing to their greed.
If we are to get people to take pensions seriously, especially young people, we need to forget about swapping pensions for home ownership. We need instead to get people using the collective power of our pension pots to do good things. This starts one person at a time.
So when I talk today to that big high street bank, and the equity release council and to the payroll community, I’ll be talking about this paradigm shift that is needed to get people saving more. I hope to meet some of you during the day!