UK - Britons have gone on a national borrowing binge, writes Mary Davies, director of The Pre-Retirement Association,
The increase in levels of personal debt threaten the economy and easy credit led one person into £22,000 of debt – these have been some recent newspaper headlines.
Low interest rates, high property values and easy borrowing opportunities have all encouraged personal debt on a huge scale. The average household now has debts of £45,000, according to some reports.
Anxiety related to the large levels of consumer debt is being felt even at government level. All this spending has helped the economy, although some economists feel that it is unsustainable. If interest rates were to rise and property values fall many people would be in a financially difficult position. If people do stop spending what will this do to the economy?
Some observers suggest it could trigger a recession, although the optimists are expecting the borrowing and spending to run out of steam rather than running into the buffers.
This “live for today” lifestyle and attitude has implications for people’s financial futures. In the longer-term this addiction to spending, will make saving for the future very challenging.
This is happening at a time when the responsibility for saving for retirement is moving from the government and employers to the individual.
Saving for retirement takes a long time. It is made more difficult if it has to be done alongside paying off debts. If the borrowing taboo is lost and spending becomes addictive the future for many people will be about “work till you drop”.
It is tempting to blame the credit-lenders for the present situation.
Ultimately our financial situation like our health is our individual responsibility. Do people have the knowledge necessary to manage this responsibility? Sadly many do not.
If we really are to tackle this problem of debt, which has potentially disastrous implications for millions of people, we must seriously consider how to roll out financial education to all. It is already too late for some.
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