‘The Good Guide to Finances at 40’ – new guide reveals how to avoid a midlife financial crisis

New figures reveal that a third of Britons aged between 35 and 39 have no money saved into a pension at all. Good With Money, the online ethical personal finance specialists, has released a new guide sponsored by EQ Investors that offers tips on how to avoid a midlife financial crisis for those at or approaching 40.

Facebooktwittergoogle_pluslinkedinmailFacebooktwittergoogle_pluslinkedinmail   by Ben Faulkner, 14th October 2016

With contributions from a spectrum of financial experts, including EQ’s Jeannie Boyle. The guide reveals some worrying sums around pensions, intergenerational financial planning and the role that impact investing can play.

Pension shortfall

By 40, the average pension pot of a woman is £15,753 according to figures from the Office for National Statistics (ONS). With no growth, this would generate an income (via an annuity) in retirement of £800 a year. A man’s average pension pot of £18,403 would generate a little over £900 a year.

Assuming growth of 5 per cent over the next 25 years between the age of 40 and retirement, the woman’s pension would be worth £54,840.77, giving £2,700 a year, while the man’s would be worth £64,066, giving £3,200 annually.

Neither of these figures seem a great deal, whether or not they are supplemented by the State Pension. Indeed, these ‘average’ pension pots with ‘average’ growth would deliver a monthly income of less than £300 in retirement.

Saving for your children

Children today are facing a perfect storm of financial adversity as a result of sky high property prices, steep higher education costs and likely lower investment returns.

To pay for university tuition fees at their current amount of £27,000, a parent would need to invest £125 a month for 13 years until the child is 18 in order to generate funds to cover their undergraduate study completely.

Starting salaries, on the other hand, if they follow recent trends, are unlikely to have kept up with the increases in outgoings for young adults. They have increased by just about 3 per cent in the last six years, according to High Fliers.

While we might expect that giving our offspring a financial helping hand is going to cost us, we might be rather shocked to discover quite how much is likely to be required. One of the key messages is – ‘start early’.

Impact investing

Whilst we all know we need to save for retirement, different motivations are needed to engage different generations. The impact investing approach has been gaining traction with people that want to invest in ways that support their beliefs and social goals, in addition to financial return.

Impact investing has the added benefit of benefiting your children and their offspring. Many of the world’s biggest problems – resource scarcity, clean energy, education, housing, urban transformations – require significant investment. The positive impact approach invests in businesses that are seeking to address these challenges.

The Good Guide to Finances at 40, looks at the choices and decisions facing 40-somethings when it comes to money.

» Download a copy of the guide here.

 

About the author: Ben Faulkner

Ben joined EQ in 2015 and has over 14 years’ of experience across the pensions, financial technology and wealth management sectors. At EQ, he is responsible for developing, managing and implementing the marketing communications strategy. Outside of work, Ben’s two daughters keep him busy. He enjoys keeping fit, especially running and cycling along the Pilgrim’s Way.

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