Please note: this blog was published in January 2022 and its content is based on what was correct at the time of writing. As a result, some of the facts and opinions may no longer be current or relevant.
Chances are, at some point in your life, you’ve considered yourself poor. That could be a self-title because you couldn’t afford to do everything you want, it might be that you’re relying on benefits to help get you by, or you may even be classed as working poor.
The other day in a Teams Call, some of us were talking about our first jobs, the minuscule salaries we were paid and the lengths we had to go to in order to make ends meet.
But the startling thing wasn’t that a lot of us relied on noodles or were paid £250 a month for full-time work, it was the fact that this sort of practice is normalised for young people.
The difference between being poor and living in poverty
Before we go into much more depth, it’s important to understand the difference between being poor and living in poverty. Poverty isn’t just financial, it’s physical and emotional, it’s not having enough money to feed yourself, pay the bills or provide shelter.
Poverty is living in fear that you’ll be made homeless – if you’re not already – that your children may end up in social care, and you don’t know where your next paycheck will come from.
Being poor is typically less long term. Perhaps you’ve spent most of your money before the end of the month, or you can’t justify buying something new right now or perhaps you haven’t got enough saved up to afford to go on holiday. You may call this poor, but it’s better classed as being broke.
Unless you’re genuinely worried about becoming homeless, you’re not living in poverty.
Working poor, or in-work poverty, has been on the rise in the UK over the last 20 years – accounting for more than half of people living in poverty.[1]
That’s a scary statistic, as it highlights the fact that just working in the UK – a country with an established national minimum wage – isn’t enough to guarantee that you’ll be able to make ends meet. But this isn’t an article about poverty, instead, we want to look at the stereotypical ‘broke student’ and why that’s considered such a normal thing.
Student stereotypes: myth or reality?
We all know – or at least should know - that gross generalisations about a group of people don’t really give you an accurate representation of everyone in that group.
And I’d argue that’s true for almost everything, except students. Obviously, there are exceptions, but if you got a group of ex-university students together and started talking about the length they went to in order to make ends meet, then you’d end up with a whole heap of stories.
When you think about it, it’s not surprising at all. If you applied for a maintenance loan then you had just three paydays throughout the year. Imagine being paid three times a year in your job – the amount of budgeting and planning that has to go into stretching your money out would practically earn you an honorary maths degree.
Then, if you do get a job to help bring in some money it needs to be flexible or nights to allow you to continue with your studies.
And while those types of jobs are typically plentiful in a university town, they don’t tend to pay more than minimum wage and are often provided as ‘Zero-hour contracts’ which don’t mean that you’re guaranteed work – but more on this later.
Being poor doesn’t stop when uni does
This student stereotype doesn’t end when university does. In fact, when we were talking about this on our Teams call, many of the stories that we shared came from our first few years at work.
Some of us ended up paying more on accommodation and commuting than we made in our monthly salary, others of us struggled to find a job that would allow us to not live-in shared housing, or even go on a nice vacation.
Finding a job that pays £25,789[3] straight out of university can be difficult – especially with the increasingly competitive graduate job market. For many young people, this often means accepting the first job that’s offered to you – even if it doesn’t pay what you’re truly worth.
There have been a lot of steps to try and improve the number of people living in poverty in the UK – for example, in April 2016 the government introduced the national living wage, after being inspired by the Living Wage Foundation who worked out what employees and their families need to live.[2]
We need to talk about inflation
Inflation in the UK is currently at an all-time high, which means that your money doesn’t go as far as it once did. This is worked out using an index of items and measures the cost things were against what they’ve increased to – the average increase or decrease is then the measure of inflation.
At the start of 2022, we saw inflation hit the highest figure in nearly 30 years, with the official figure for this being around 5.4%.[5]
This isn’t an impossible situation
When you’re living in in-work poverty, it can feel overwhelming and endless, but it doesn’t need to be. You can take steps to improve your situation and hopefully break free from this vicious cycle.
The less money people have, the better they tend to be at budgeting, as it becomes essential to make ends meet. But when it comes to getting even more from your money, then some things that you can try including:
- Ask for a pay rise – if you don’t ask, you won’t get. You may want to be strategic here by showing your employer your worth, compare your salary to other professionals, and highlight your responsibilities.
- Move job – gone are the days where loyalty to an employer pays off, if you’re struggling to make ends meet then look for another job with better pay. The ‘Great Resignation’ of 2021 has continued into 2022 with more people looking for meaningful, better paying employment.
- Move providers – with cashback and rewards on offer, looking at what’s available may find you better rates which could help in the long run, but you could also get extra cash to help you in the here and now.
- Look for help – you may be entitled to government benefits or could seek financial help from a charity. There are a number of benefits calculators you can use to see what you may be allowed to claim: https://www.gov.uk/benefits-calculators
Offering a helping hand
The bank of mum and dad is a nice thing, but not everyone has the ability to rely on parents. If you have children and you want to offer a helping hand, then one thing you could do is start saving little and often when they’re young.
If you pop £10 a month into a Junior Stocks and Shares ISA from when they were born to their 18th birthday, they could have nearly £3,070![6]
For a young professional or a student, this could create a substantial emergency fund – helping them to avoid living in poverty and, depending on their financial situation, could offer a way to do things they enjoy – like go on holiday or buy a car.
Thanks to Wealthify’s Junior ISA friends and family payments, saving for your children could be even more affordable. For example, £10 a month could be reached by two people chipping in £5 a month or four people adding £2.50!
When it comes to poverty, everything above zero counts, so while £3,000 may not sound like a life-changing amount – when you’re living hand to mouth it makes a huge difference.
At Wealthify, we understand that not everyone has the same financial background which is why we work hard to keep investing simple and our costs low. You can open a Junior ISA with just £1 and add to it whenever you want – there’s no tie ins, no hidden charges and you can track your Plan’s performance from wherever you are using our app or online dashboard.
References:
- https://www.theguardian.com/business/2020/feb/07/uk-live-poverty-charity-joseph-rowntree-foundation
- https://www.livingwage.org.uk/what-real-living-wage
- https://www.graduate-jobs.com/gco/Booklet/graduate-salary-salaries.jsp
- https://www.bigissue.com/latest/uk-poverty-the-facts-figures-and-effects/
- https://www.bankofengland.co.uk/knowledgebank/will-inflation-in-the-uk-keep-rising
- £2,981 is the projected value for a Confident Plan (Medium Risk Plan). This is only a forecast and is not a reliable indicator of future performance. If markets perform worse, your return could be £2,353. If markets perform better, your return could be £4,050. Values correct as of 01/08/2023
Past performance is not a reliable indicator of future results.
With investing your capital is at risk and your child could get back less than invested, and less than what you or any contributors have invested
