Take Away Coffee or Pension Pot?

In my last blog I commented upon the undeniable difficulties faced by young people today – especially as regards getting on the housing ladder and making ends meet in this modern, economically uncertain world. I have absolutely no doubts that it is more difficult today for youngsters than it was for my generation. When I left school in the very early 1960s I had no problem getting a job and in common with others of my generation could, with some certainty, look forward to a “job for life” should I desire it. Whatever the job, people of my era could face the future with confidence: work hard, be careful with your finances and your future is at least reasonably secure. It is no longer true – young people leaving school today are not blessed with a range of job opportunities. In the UK we have many working on zero hours contracts which give little or no employment security or rights, and daily we hear of company mergers, cost cutting and the like which means that anyone, no matter how diligent and hard working, can suddenly find themselves on the employment scrap heap. No, I would not wish to be starting off again!

Starbucks - with a typical clientèle - they have plenty of
money to spend on coffee and cup cakes but not,
apparently, on pension provision. 

Having said that, I never cease to be amazed at the outlook and expectations of younger people which seem to me to often fly in the face of reality. My grumbling observations were given some credibility when my wife read an article to me from her newspaper over breakfast earlier this week. The article was concerned with the continuing problem of saving for a pension for one’s old age. All the pundits and financial advisers  recommend that it is vital to begin saving for a pension at the first opportunity – sadly, however,  this is advice that many of the young all too often ignore. Sometimes saving for an old age pension will simply not be an option if it is a choice between that and putting food in one’s belly – a situation that only too sadly very prevalent in the UK for many. It is a situation that we in the UK should be deeply ashamed of and is entirely inexcusable in one of the richest countries in the world. Our political masters of whatever persuasion should hold their collective heads in shame. But, those cases aside, it is also true that very many younger people who could afford to ensure some pension provision from the earliest time do not take it seriously. I well remember a few weeks before I retired, we had a visit from teachers’ union representative to talk to my staff about changes that were to be implemented in the teachers’ pension scheme. These changes meant that all teachers, but younger ones especially, had to make some pretty important decisions about their pension contributions and long term provision. “How many young teachers do you have on the staff” the man asked me. I explained that the vast majority were quite young and new to the profession. “Oh dear” he replied “they won’t be interested at all”. He was right. We sat through a meeting lasting about 90 minutes while he explained the changes and the impact it would have. Sadly, throughout the period the young teachers were totally disinterested – they asked not a single question, raised no concerns and left at the first opportunity. The only interest and questioning was from those who were older. The youngsters saw it as too far away to bother about – they had other priorities.

One of our village's booming coffee shops from which, each
morning, a steady stream of  younger people emerge with
their cups of take away coffee as they run for the bus

But back to the article that my wife read out to me! The gist of the article was that although saving for a good pension is very hard and means making financial sacrifices for something that is many years away a few simple things, if implemented early enough, can make a huge difference. An organisation (The National Employment Saving Trust) had calculated that small changes to spending habits such as cutting down on smoking, drinking, eating out or buying coffee could help younger workers build up a lump sum worth thousands of pounds for their pension. It calculated, for example, that a homemade packed lunch rather than a bought sandwich five days a week could save about £15 each week which would save a 30-year-old worker £63,700 in today’s money by his or her retirement age - a substantial boost for their pension pot.  Having one fewer pint of beer and one fewer visit to the coffee shop each week could build up £26,600 by retirement age. One fewer packet of cigarettes could save £31,400 over the same period. Abandoning the gym would potentially save £36,100 and resisting take-away food in favour of a home-cooked meal once a week would add £12 a week to their retirement fund, or £50,900 by the age of 68.

Two vans full of rolls, snacks, cakes, coffee, soft drinks
crisps and the rest - and all ready to be delivered to the offices
around the village. All costing far more than a home made
sandwich would cost - that's another few pounds
I can't put into my pension pot!

Now, of course this is all highly theoretical and makes lots of assumptions – we all know that life doesn’t work like that and few of us are that disciplined.  But, I would suggest, the principle is right. Whilst it is true that for very many young people, because of their economic and personal  circumstances or employment insecurity, would find it impossible to save regularly for a pension for many others that is not the case and that the amount they save or don’t save in the end comes down to personal financial choices and lifestyle.

As my wife read the article to me I thought back to a few minutes before we sat down to eat our breakfast and look at the papers. We had just walked though the village, as we do each morning at about 8 a.m., when we take an early morning walk and pick up our newspapers and do a bit of shopping. Each morning we see the same thing: a steady stream of younger people running for the bus or jumping into their cars outside the village shops. And where have they been? – mostly to the several little coffee shops and cafes on our village High Street. All of these youngsters emerge clutching cups of take away coffee to drink while they drive or as they sit on the bus. Many clutch ready made sandwiches and rolls that they have bought for their lunch.
Outside one of the shops there are always a couple of vans being loaded with sandwiches, salads, soft drinks and the rest – these visit the many office units that surround the village during the morning and sell their wares to the workers. And it all costs money! Like many places in the UK our village has a surfeit of coffee shops – out of the fourteen shops that line our High Street four are coffee/sandwich bars. In addition there are two others just off the High Street. It is a business that clearly pays, otherwise they would not be there. Walk down any High Street and you won’t walk far before you come across Starbucks, Costa, Cafe Nero and a thousand others all peddling their wares – coffee, hot chocolate, wraps, cup cakes and the rest – it is a boom industry and look around the clientèle and you will find that it is invariably the younger end of the spectrum sitting there or standing in the queue! It is the same in other walks of life. Go into a city centre like Nottingham on any night of the week and the restaurants, coffee bars and pubs will be booming – and again, overwhelmingly, with younger people. When I worked with young teachers and trainee teachers I made many good friends who kindly still keep in touch or who share their lives via Facebook etc. I read regularly of extended trips to far flung places, of honeymoons on the other side of the world, of “taking a year out”, of “getting plastered last night at XXXXXXXX’s party”, of many hundreds or even thousands of pounds spent on a wedding dress and of stag and hen parties which can last several days and take place in cities and resorts across Europe, I see photographs on Facebook of parties and drinking sessions that seem to occur with huge regularity and I read of meals out or of “I’m standing in the takeaway waiting for my Chinese meal”. And it all costs money – and that implies financial choices. The article the Pat read to me over breakfast is clearly made real here in Nottingham – lots of young people who elect to spend their disposable in a particular way – but maybe not on pension provision!

Even the top people do it - take away coffee is almost a
fashion statement today - the awful Rebekah Brooks
and her husband arrive at the Old Bailey to begin another
day in court in the long running phone hacking trial

I don’t begrudge young people their opportunities, lifestyle and choices – indeed, I wish those options had been around when I was their age. But in those far off days flexible money, credit cards, ease of long distance travel and, most importantly, values, expectations and social mores were not what they are today. When we got married it would have never occurred to us have the reception in a posh hotel or to hire penguin suits for the male guests – you wore your ”best” – and probably only - suit. Similarly, buying a sandwich for lunch, having a coffee while out shopping or eating out once a week was not on the agenda – not just for us but for the majority. This was not primarily because the money wasn’t there – although that was certainly true – but rather because people of past generations had, in general, other priorities. Saving money for the future was much more a way of life. When you could, you put something by “for a rainy day” – for when some emergency or unexpected expense befell. Today, I assume, younger generations solve the rainy day crisis with the credit card and spend to the hilt while the going is good. This was brought home to me several years ago when a young teacher on the staff came to me when she was applying for her first mortgage on a house she hoped to buy. I wrote a letter on her behalf to the building society from whom she hoped to get her loan stating that she was in full employment, that her job was secure and what her salary was. Understandably she was concerned as to whether she could meet the payments that would be required and she came to me to show me her calculations. I noticed on her list of monthly outgoings was one labelled “servicing”. I asked her what this was and she explained this was the amount that she set aside each month to “service” her various credit card debts.  This was new to me, I always assumed that one paid of the credit card debt each month, not that you let it roll and paid off just enough to “service” it! How naive I was! Happily, she got her loan and bought her house so all ended well.

Our honeymoon booking confirmation

A couple of weeks ago we had a new central heating system fitted in our house – the old one was as old as the house, 60 years this year. We stored a lot of items in our utility room while the system was being fitted and this afternoon I was sorting some of them out. I came across a box containing lots of “treasures”,  mementoes from Pat’s and my past – letters, a scrap book, tickets and programmes from events we had attended a life time ago. And in the box I came across a letter from the hotel that we stayed at for our week’s honeymoon in 1969 – the Keats Green Hotel in Shanklin, Isle of Wight. The week cost us 19 guineas each (about £20) for half board accommodation. Obviously inflation means that prices have increased hugely since those far off days but £20 per week was more or less exactly what we were both earning each week as relatively newly qualified teachers in 1969 – so our honeymoon cost us about a week’s pay. However, our wedding was special so we felt that we should really splash out – and indeed we did! When the hotel offered us the room we had a choice – 19 guineas for a room facing the sea or 18 guineas for a rear facing room.  We broke the bank and faced the sea!  But at the same time we knew that our wedding reception, held in the local church hall (no posh hotel) in Lewisham, south London, was a perfectly normal affair for the time. We weren’t in anyway unhappy that this wasn’t some flashy hotel – we didn’t expect it and neither did our friends. We didn’t have a hen or stag party – no-one expected it and it certainly wasn’t a priority. Pat’s parents had “done us proud”. I didn’t have a new suit, but wore my best (my only!) suit.  I did, however, have my shoes repaired - my mother had a horror that I would kneel at the altar and everyone would see the worn soles and heels!

19 guineas per person per week - and it doesn't seem to
have changed at all over the past 45 years!

I contrast all this with modern weddings and honeymoons. When we were in the Canary Islands a few months ago a group of nine young women stayed in our hotel for a long weekend – they were on a hen party – four days of drinking, dancing and partying. This would not come cheap – flights to the Canary Islands, accommodation in a 5 star hotel, drinks, clubs, clothes – and of course ultimately, the cost of a wedding present. And for the bride (and, presumably, the groom) all the other associated wedding and honeymoon costs. A favourite destination for honeymoons today is Mauritius or the Maldives – places on the other side of the world. Our honeymoon cost us about one week’s wages but I don’t believe that a week (or more likely 2 weeks, given the distance) in the Maldives could be bought for one week’s wages - currently about £425.00 - of a newly qualified teacher today. I’m sure it must cost several week’s wages. But again, these are financial choices that people make. Incidentally, I have just had a quick work out and although it is true that over the years inflation has caused prices to increase that, I believe, tells only a part of the story. I have just booked a room at our favourite 3 star hotel in Devon for a week in August; the cost is a little more than the £425.00 equivalent that I spoke of above, but only marginally. In other words, even today, in these inflated times, a young couple could have their honeymoon at a splendid hotel for, proportionately, about the same price that Pat and I paid all those years ago. The reality is, however, in all the years that Pat and I have been going there not once have we seen a honeymoon couple – presumably they all go off to more exotic and expensive venues – the Maldives sounds much more of a treat than Dawlish., "To hell with the expense" is clearly the motto of the young today (and, in the long term, the pension)!

But, undeniably, the world has changed. Young people have, rightly, different priorities and expectations. They would not, I suspect, be happy with just two second hand chairs as we had for the first two years of our married life. Nor would they be happy with the second hand wardrobes or bare floors that we had for several years until we could afford something better. They would not be happy to sit in the quietly at home (not in the pub or enjoying a meal in Nottingham) in the evenings with no TV or none of the kitchen items – fridge, freezer, dishwasher, washing machine etc. that are today's “essentials”.  In the end, like the expensive cup of take away coffee bought as you get to the bus stop rather than a cheaper homemade cup or the bought sandwich rather than the home made one, or the two weeks in the Maldives rather than the week in some more humble place, or the fitted kitchen or the expensive convenience food bought from the supermarket rather than the cheaper homemade variety, these are all choices and reflect our priorities.

August 9th 1969 before we nipped off to the  church hall and then to Keats
Green - not the Maldives! Sadly, you can't see my newly soled shoes!

Sometimes those choices don’t matter but in the end the costs add up and the real cost of anything is only partly the amount you actually pay. I might pay £2.50 for a cup of coffee in Starbucks or several thousand pounds for a honeymoon in the Maldives but the real cost of those purchases is also measured by not only the impact that it has on my ability to spend money on other things but in addition the subsequent denial of any future pleasure that I might have. A meal out today may ultimately mean a lower pension tomorrow. A cup of coffee might give me a certain pleasure today and have cost me a certain amount of money – but this has to be counterbalanced by its real cost which is the potential loss of other pleasures (such as distant old age pensions) that are affected by paying for that coffee. That is a basic principle of economics which it seems to me is little understood by the younger generations.

Young people have opportunities and consequent choices that people of previous generations never dreamed of. Yes, it is tough for youngsters today and my generation never had to make those choices in quite the same way.  But with those opportunities there comes the responsibility to decide priorities and  make choices based upon a full recognition of the circumstances and the implications of the choice that one makes. Sadly, whilst I recognise the great difficulties and problems that younger people face I’m not utterly convinced that they are prepared to acknowledge the basic implications of the choices and the decisions that they are able to make. It seems to me that many, ostrich like,  simply bury their heads in the sand and deny the consequences of their financial decisions – put in simple terms, enjoy the take away coffee now, rather than worry what is around the corner.