Love and money – This Valentine’s Day, spare a thought for your future self


Ian Kelly

Ian Kelly

Fund Manager, Equity Value

We live in curious times. No government would ever countenance people writing their own medical prescriptions or driving a car without first learning how to do so and then passing a test. Yet barely a month seems to go by these days without our being given new ‘freedoms’ – ‘responsibilities’ would be a better, though presumably scarier word – to plan and fund our retirement years.

Innovations such as the 401k pension plan have meant the US has been some years ahead of the UK in focusing people’s minds on their finances in later life so, here on The Value Perspective, we thought it could prove instructive and even reassuring to see how things are working out across the Atlantic. Well, it was certainly instructive. But as for reassuring? Not so much.

The Mathematical Investor blog, for example, pointed us towards one US study that found – if one assumes future generations are set to be retired for 35 years – “many US Baby Boomer and Gen Xer households are expected to run short of money in retirement” while another concluded “more than half of future US retirees will rely on Social Security for at least 50% of their income”.

Clearly disparity of income is an issue here – in that first study, the breakdown of those expected to run short of money in retirement was 83% of those in the lowest-income quartile, 47% in the next lowest, 28% in the next and even 13% in the highest. However, as The Mathematical Investor notes, a further issue is more and more people “are now directly responsible for their financial wellbeing”.

The self-styled ‘mathematicians who muse on money’ also highlight a 17-question quiz put together by the National Bureau of Economic Research to gauge the financial literacy of US households. Touching as it does on crucial investment concepts such as compounding, diversification and the erosive effects of inflation, it is as pertinent to savers and investors in the UK as it is to those in the States.

Well, almost. If you take the test in the UK, you may want to skip some of the more 401k-specific questions. While we can probably live with ourselves on that, if you miss out on too many of the other questions, it could be a signal to spend some time reading about investment before you go back to doing it.

At a time of year when there can be such expectations on us to spread the love with cards, flowers or whatever else tickles your own Valentine’s fancy, The Value Perspective would suggest you to hold some affection back for your investment portfolio and your future self. So go on then –how financially literate are you?


Ian Kelly

Ian Kelly

Fund Manager, Equity Value

I joined Schroders European equity research team in 2007 as an analyst specialising in automobiles. After two years I added the insurance sector to my coverage. In early 2010 I moved into a fund management role, and then took over management of two offshore funds investing in European and Global companies seeking to offer income and capital growth. 

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