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The price is wrong: survey exposes lack of personal finance knowledge in UK The price is wrong: survey exposes lack of personal finance knowledge in UK
(35 minutes later)
British people think the cost of raising a child is four times less than the actual amount, according to a survey by Ipsos Mori that suggests the public’s financial knowledge is sketchy at best.British people think the cost of raising a child is four times less than the actual amount, according to a survey by Ipsos Mori that suggests the public’s financial knowledge is sketchy at best.
Related: Most of what Britons think they know about personal finance is wrongRelated: Most of what Britons think they know about personal finance is wrong
Other things underestimated by Britons include the cost of a university education and how much they need to save to get a pension payout of £25,000 a year when they retire. They also believe that not putting enough money away for retirement is standard practice when under-savers are actually in the minority.Other things underestimated by Britons include the cost of a university education and how much they need to save to get a pension payout of £25,000 a year when they retire. They also believe that not putting enough money away for retirement is standard practice when under-savers are actually in the minority.
According to one study, the estimated cost of raising a child is £229,000 but the average guess of those surveyed by Ipsos Mori is just £50,000. Oddly, those who are parents guessed even less accurately, at £10,000 lower than those without children in the home.According to one study, the estimated cost of raising a child is £229,000 but the average guess of those surveyed by Ipsos Mori is just £50,000. Oddly, those who are parents guessed even less accurately, at £10,000 lower than those without children in the home.
The public believe that most students today leave university with £21,000 of debtwhen it is actually £40,000 on average. Younger people are slightly better at estimating this, with those aged between 16 and 24 saying £30,000. The public believe that most students today leave university with £21,000 of debt when it is actually £40,000 on average. Younger people are slightly better at estimating this, with those aged between 16 and 24 saying £30,000.
To get £25,000 a year paid out as their pension, British people believe they will have to save £124,000 over their working life but that is short by some distance. Pension calculators show the correct figure is more than twice that amount at over £300,000 (taking receipt of the state pension into account).To get £25,000 a year paid out as their pension, British people believe they will have to save £124,000 over their working life but that is short by some distance. Pension calculators show the correct figure is more than twice that amount at over £300,000 (taking receipt of the state pension into account).
In spite of thinking they have to save less than is required, people guessed that 65% of the population were not putting enough money away for their retirement. Government estimates show that what it describes as under-savers are in the minority (43%).In spite of thinking they have to save less than is required, people guessed that 65% of the population were not putting enough money away for their retirement. Government estimates show that what it describes as under-savers are in the minority (43%).
Britons do know their house prices and the cost of milk, though.Britons do know their house prices and the cost of milk, though.
Their average guess for the cost of a home in the UK is £190,000, which is very close to the correct figure of £194,166. Unsurprisingly, those living in London think it is much higher: 29% estimate the average cost is £300,000.Their average guess for the cost of a home in the UK is £190,000, which is very close to the correct figure of £194,166. Unsurprisingly, those living in London think it is much higher: 29% estimate the average cost is £300,000.
But when it comes to buying one, most people would probably be surprised when they got to the bank. Britons believe the average deposit for a house is £20,000 when it is £72,000. Only 1% of those surveyed guessed correctly that it was between £70,000 and £79,000.But when it comes to buying one, most people would probably be surprised when they got to the bank. Britons believe the average deposit for a house is £20,000 when it is £72,000. Only 1% of those surveyed guessed correctly that it was between £70,000 and £79,000.
The average full-time salary before tax in the UKis £27,000 and the public are near the mark with an average guess of £25,000. However, they also estimate that 10% of the population earn £150,000 or more, enough to put them in the top tax bracket. Just 1% earn that much. The average full-time salary before tax in the UK is £27,000 and the public are near the mark with an average guess of £25,000. However, they also estimate that 10% of the population earn £150,000 or more, enough to put them in the top tax bracket. Just 1% earn that much.
When asked for the price of a pint of milk in 2012, former agriculture minister Jim Paice declined to answer, explaining “my wife buys most of it”. He was not the first politician to be tortured by that question, which is intended to test how in touch they are with Britons’ everyday purchases.When asked for the price of a pint of milk in 2012, former agriculture minister Jim Paice declined to answer, explaining “my wife buys most of it”. He was not the first politician to be tortured by that question, which is intended to test how in touch they are with Britons’ everyday purchases.
Ipsos Mori’s data seemingly confirms this premise. The average guess is 50p, just a penny off the the correct 49p. Although not everyone is so in touch, with 10% saying a pint costs 29p or less and 6% expecting to pay more than £1. Neither of those answers would go down well on Question Time.Ipsos Mori’s data seemingly confirms this premise. The average guess is 50p, just a penny off the the correct 49p. Although not everyone is so in touch, with 10% saying a pint costs 29p or less and 6% expecting to pay more than £1. Neither of those answers would go down well on Question Time.
The majority of Britons do not know what is going on with the deficit (how much more the government spends than it earns) despite its central presence in the political debate over the past few years.The majority of Britons do not know what is going on with the deficit (how much more the government spends than it earns) despite its central presence in the political debate over the past few years.
Although 42% correctly say the deficit has decreased since 2010, 32% think it has gone up and the remaining 26% do not know. This splits along party lines with 63% of Conservative voters believing there has been a cut in the deficit compared with 35% of those who back Labour.Although 42% correctly say the deficit has decreased since 2010, 32% think it has gone up and the remaining 26% do not know. This splits along party lines with 63% of Conservative voters believing there has been a cut in the deficit compared with 35% of those who back Labour.
And it seems the low interest rates that followed the recession have become stuck in public’s mind. When asked what the Bank of England’s average base interest rate for the past 40 years is, the average guess is 4%, but rates as low as that – even though they are higher than the current 0.5% – are a relatively new trend. Since 1975, the average rate has been 7%.And it seems the low interest rates that followed the recession have become stuck in public’s mind. When asked what the Bank of England’s average base interest rate for the past 40 years is, the average guess is 4%, but rates as low as that – even though they are higher than the current 0.5% – are a relatively new trend. Since 1975, the average rate has been 7%.
Bobby Duffy, managing director of the social research institute at Ipsos Mori, said: “It’s concerning that we think under-saving for pensions is a very widespread social norm, when that’s not really the case. This is important – we know that our perceptions of what normal behaviour is can be a strong effect on our own behaviour.Bobby Duffy, managing director of the social research institute at Ipsos Mori, said: “It’s concerning that we think under-saving for pensions is a very widespread social norm, when that’s not really the case. This is important – we know that our perceptions of what normal behaviour is can be a strong effect on our own behaviour.
“The things we get more correct are the figures we see regularly reported in the news – house prices, interest rates and average wages. But the findings show underlying knowledge around these is very shaky. In particular, we hugely underestimate the historic level of interest rates – we’ve forgotten how unusual the current low rates are.”“The things we get more correct are the figures we see regularly reported in the news – house prices, interest rates and average wages. But the findings show underlying knowledge around these is very shaky. In particular, we hugely underestimate the historic level of interest rates – we’ve forgotten how unusual the current low rates are.”