Jayne Dowle: Debt we owe to the example set by grandparents

It would be so easy to get carried away, but I’m not backing down. If I tot up the credit available immediately to me through my bank overdraft and several credit cards, it would easily reach thousands of pounds. One click of the mouse and we could be hunting out the passports and on our way to America or Mexico or even Australia. I know plenty of people who do it like this every summer. They are still paying for their holidays before they have even bought their Christmas presents, sticking them on the credit card too, of course.

I think Jack thinks I am hopelessly old-fashioned, but I am sticking to my guns. I might not be swimming in the Indian Ocean this summer, but I’m definitely swimming against the tide. A new major report from the Centre for Policy Studies think-tank finds that British people have one of the highest levels of personal debt in the Western world.

To my grandmother’s generation, owing money to anyone was a source of shame. Today, it is simply accepted as a way of life. People regard their credit card limit as a savings account to be dipped into whenever the fancy takes them. Bankruptcy, once whispered of in hushed tones, is now openly admitted in polite company. Young people are leaving university this summer with thousands upon thousands of pounds owing in student debt and don’t seem remotely concerned about how they might pay it off. And the future? It’s a long way away. Tomorrow will never come. No wonder the pensions industry is in crisis. Within a decade or so, the concept of saving for retirement will be so alien, there will be no clients for all those financial advisors to advise.

I can’t take any moral high ground on this. I’ve been there with the credit card in the shop when I’ve wanted something and it’s just so easy to punch in those four numbers and forget about it. That’s the problem with money these days. So few of us deal with actual notes in our hand, it’s easy to lose sight of its value. Cash has become a remote concept. It’s transferred into our bank accounts by computer and disappears just as magically. We can even pay bills by mobile phone.

Unfortunately, there is always a price to pay when real life gets in the way. You might think you can manage the minimum monthly repayments but what if you lose your job? What if a major unexpected expense drops on your doorstep one month – the car breaks down or the roof springs a leak?
Before you know it, your finances are spiralling out of control and there’s no money to pay for anything, unless you borrow it from somewhere else.

Of course, we’re good at justifying this. We defend our growing debt against the ever-rising cost of living. Explain away the new car on finance as an unavoidable expense, instead of making do and mending the old one. Convince ourselves that our life would not be complete unless we have the latest refrigerator and tell ourselves that we “deserve” a treat when a friend suggests booking a weekend away at a health spa. It takes huge amounts of self-discipline and an iron will to just say “no” and stay solvent. The link between saving and spending has been stretched beyond its limit.

That’s why George Osborne has been urged to carry out a major overhaul of the way that individuals save and make plans for their financial future. Reforms to ISAs (Individual Savings Accounts) would be a start, experts say. And I agree. Making saving more attractive and accessible would be a good idea.

However, for years now, governments have set a terrible example. Gordon Brown penalised those who had saved hard for retirement with his stealth tax on pensions. Such actions cause ordinary people to lose faith in political leadership and throw caution to the wind. How can politicians preach to us about saving when they rack up the national debt shoring up the banks and sending aid to foreign countries?

Let’s be honest: the Chancellor can invent all the savings accounts in the world, but what’s the point if no-one knows how to actually save money any more? He can’t put a bit aside for us every month and help us to each live within our own means. The truth might hurt, but we have to do that for ourselves.