How savvy are you on issues surrounding personal and public finances? According to a survey recently carried out by Ipsos Mori and King’s College London (KCL), the British public severely underestimates the cost of financial affairs, especially the cost of big life events such as raising children and going to university.
The results of this survey are significant, as being able to understand the true cost of living is vital for making essential financial decisions and lifestyle plans. It’s therefore crucial that we find ways to improve public understanding of these issues. Read on to find out about where we’re making the most mistakes:
How Much Does it Cost to Raise a Child in the UK?
In the survey, the average guess at the amount it costs to raise a child until the age of 21 was £50,000. This figure represents under a quarter of the actual cost, estimated at around £229,000, according to insurance company Liverpool Victoria.
What’s more, the average figure amongst those living with their children was £40,000, demonstrating that the misperception is not one based on a lack of experience.
However, we also overestimate the cost of childcare; according to the answers to the survey, the cost of a week’s nursery care sits at about £250 per week. The actual figure is less than half of this at around £115 per week.
How Much Debt Do Students Leave University With?
Again, this was severely underestimated by the majority of the respondents. The average answer saw the debt at £21,000 – including tuition fees. The actual answer is over double this figure at £44,000, according to a recent study.
How Much Do You Need to Save for a Pension?
In order to get an income of £25,000 a year in retirement (the national average), most people think that you’d need to put £124,000 into a private pension, assuming they were also claiming a full state pension. The real figure is more than twice this at over £300,000.
Maybe unsurprisingly, younger people are more likely to underestimate the amount they’d need to put away for a pension: over half of those under the age of 35 think they’d need to save less than £100,000.
Things The Public Get Right
However, not all the answers were totally inaccurate. According to the survey, we get the average value of a house close to the mark at £190,000, just shy of the actual cost of £194,166.
The average salary was also fairly accurately estimated at £25,000 before tax, with the true figure being £27,000.
And the most important question – the cost of a pint of milk. The average person answered this almost exactly on the mark at 50p, compared with the actual answer of 49p.
Would you have guessed incorrectly on this survey as well? If you feel like you’re not clued up enough about personal finances, or if you need guidance on how to make the most efficient financial decisions, visit www.letssavemoney.com and check out the easy to follow one-minute guides.