UK Employment Situation “Alarming”

I realise that I’ve banged on about emergency funds quite a bit recently, but I make no apology for it, as a disturbing news release by the ILO (International Labour Organisation) last week shouts from the rooftops that the the current employment situation is “alarming” and unlikely to improve any time soon.

40% Out of Work for >1 Year

Traditional wisdom surrounding emergency funds states you should have somewhere between 3-6 months of expenses saved up. Worryingly, the ILO found that more than 40% of jobseekers in advanced economies had been without work for over a year, indicating that it was taking much longer for people to find jobs.

When you consider the Eurozone statistics – Spain’s unemployment rate is almost tipping 25%, France has had its 11th consecutive unemployment rise in as many months, and the UK is expected to top almost 9% over the summer period – things are bleak, particularly with forecasters from Centre for Economics and Business Research (CEBR) today warning it is likely to keep rising for the next 5 years.

Forced Retirement at 65

When you couple this with a recent supreme court ruling that employers can force retirement at 65, and UK company insolvencies are back on the rise again, there has never been a more important period in our recent history to have as much cash stashed as possible.

Public Sector Cuts Backfiring

David Cameron and the coalition government is slashing the public sector, with 20% cuts in almost every department. But it’s ok, because “the private sector will pick up the slack”, he said. Alarming statistics from Markit shows the eurozone composite purchasing managers’ index (PMI) fell to 46.7 in April from March’s 49.2 however, a figure described by Howard Archer from IHS Global Insight as “truly dire” as that indicates the private sector is actually sharply contracting, and not expanding to ‘take up the slack’ in the slightest.

Oh, and in case you missed it, just to add the final insult – the UK is back in recession, too.

Unfortunately in these turbulent times there is unlikely to be any such thing as a ‘safe job’. Certainly some will be safer than others but gone are the days of jobs for life.

Do More, With Less

Companies are demanding more of their employees, and those who are unwilling to give are readily shown the door under the guise of ‘performance management’. After all, there isn’t exactly a shortage of people looking for work.

At least one company I know of takes the view “be grateful you have a job. Now accept this re-trebling of your workload or, you know where the door is.”

I can see their point. Companies need to do more with less. They need to streamline and make efficiencies, else they may not exist this time next year. But how far is too far when it comes to businesses taking their pound of flesh from their employees?

Bottom line: Your emergency fund probably isn’t big enough. Start growing yours today, for a safer tomorrow! 

So much has been going on this week that I’ve actually lost track of what happened at the beginning of it!

Rob from The Self Employed Investor and I have teamed up to begin a campaign to introduce a compulsory personal finance educational syllabus to UK schooling, at both primary and secondary levels. Lend your support to it and at a minimum like the Facebook page supporting our campaign, and share it among your friends.

Best from around the web this week

• Minimum wage, and why you shouldn’t be on it – Sterling Effort
• Should I dump my government bond funds? – Monevator
• Population Sustainability – Self Employed Investor
• 10 Worst Ways to Make Extra Money – Wise Bread
• Should over-50′s resign? – Help Me To Save

This week on Five Pence Piece

• Friday: Calls to Arms! Personal Finance in Schools
• Thursday: 10 Things to do after losing your job
• Wednesday: 10 things to do before losing your job
• Tuesday: Growing our own fruit, veg & herbs
• Monday Madness: 30th April 2012
• Monday: 10 tips to maximise your productivity

Hope everyone has a great weekend!

THE PROBLEM …

Did you know about and fully understand compound interest at age 16? Or the difference between an ISA and a Regular Savings Account?

I’d wager probably not.

Even if you did, you probably didn’t learn it at school.

The United Kingdom and most other developed countries across the world urgently need compulsory personal finance education at primary and secondary levels. Right now students leave the family unit to enter further or university education – or the even more daunting world of work – with only the vaguest hint of how to manage their money, wages, taxes and bills.

The little that is taught is about the math and not about the personal responsibility, the benefits of being financially astute and the dangers of not. It does not present the knowledge in a fun and ‘wow’ style; it’s just all about the numbers in the maths lesson.

It doesn’t explain what happens when you enter into a contract, or the dangers of high APR’s for having the latest MacBook Pro on credit rather than saving up for it. It doesn’t care about what happens when you over-extend yourself and end up spending more than you earn.

THAT URGENTLY NEEDS TO CHANGE

Rob from The Self Employed Investor and I want children to learn the value of compound interest in a “hey, that’s cool!” way, and not just as a series of numbers in a workbook.

We want to show the dangers of mis-managed debt and debt in general. We want to be able to teach how personal budgeting can keep everything together and how astute financial planning can take care of them when things go wrong.

Martin at Money Saving Expert tried very hard last year to get this through UK Parliament but was met difficulties at almost every step. He didn’t get to make the changes we all so commonly want and the country so desperately needs.

Did Martin struggle because the economic model requires endless growth and requires a certain percentage of people to be in debt to function. To spend more than they earn. To live paycheck to paycheck, and on credit. To fuel the credit industry; the debt recovery industry; and the banking sector.

The petition he created (now closed) on the government website reached 118,848 signatures and elicited the following response:

“Schools already use Personal, Social, Health and Economic (PSHE) education as a framework within which to teach young people about personal financial management. The existing PSHE programmes of study include elements aimed at ensuring that by the time they leave school, pupils should be able to manage their money, understand and explain financial risk and reward, and identify how finance will play an important part in their lives and in achieving their aspirations. We are currently carrying out a review to determine how best to support schools to improve the quality of all PSHE teaching.”

This response does not go far enough. At best they have committed to ‘carrying out a review’. What the system requires is a commitment to fundamentally change the current system and introduce specific personal finance modules at both levels of primary and secondary education. Children should know how to manage their money, but it is obvious they do not.

Leaving the beginnings of personal finance to later stages of secondary schooling is too late.

As I wrote in this week’s Monday Madness, Canada along with Marvel and Visa are putting together lesson plans using superheroes. While this may well appeal and capture initial interest among primary level children (5-10 yrs, for overseas readers), even just including basic details of compound interest at this level could spark a life-time of money-management ability:

If you can show a 10 year old how they can turn £20 a month into £56,124 by the time they’re 65 by only having to save and not spend £13,210 of their own money, I think that’d grab a lot of attention.

STUDENTS ALSO WANT THIS CHANGE

Just yesterday (Thursday May 3rd, 2012) the BBC reported students see the current math system as flawed and irrelevant. One student spoken to by the BBC said “Show me how I can use maths in business, to do accounts or banking”, and 63% of those surveyed by City and Guilds were worried about money.

Chris Jones of City & Guilds said: “We are not saying maths should be dumbed down, but it needs to be more relevant to the real world.”

HELP SPREAD THE WORD!

• Like this post on Facebook (see left!)
• Like/Share our Facebook Campaign
• Tweet this page and urge your friends to re-tweet (see left!)
• Blog about the campaign and share the issue with your readers
• Add our blog buttons (big | small) to your posts or sidebars and link
• Email your contacts in the blog/media world asking for campaign support

LOBBYING

I have written to my MP, and the education secretary, and my local media. If you have the time to do so and agree with what Rob and I are saying, please consider doing the same.

We won’t get there without your support so please, please do all you can to raise awareness that the current education system is effectively failing our children when it comes to all matters personal finance.

With enough pressure and support, the United Kingdom and the rest of the world can have relevant, useful, real-world personal finance knowledge taught where it matters most.

 & Rob