A culture of instant gratification and short-term thinking is prohibiting almost 40 million UK adults from planning for the future
UK adults could be set for a financial crisis at retirement, as more than three quarters (77%) of the population admit they are completely unprepared for life after retirement, which means 39.8 million people have no retirement plans at all.
“It is natural for people to prioritise the present over their future, but we are in danger of creating a nation that is addicted to the quick-fix of instant gratification at the expense of important but basic long-term life goals such as health, wellbeing and financial security,” said Professor Vlaev.
The ‘Decodes…. Short-Termism’ study was conducted by Moneyfarm, with the help of behavioural scientist Ivo Vlaev, professor at Warwick University, and a panel of leading experts from the fields of science, psychology, and trends.
“The majority of Britons are taking an extremely high-risk approach to future planning,” said Scott Gallacher, Director, Moneyfarm. “They are sleepwalking their way into an uncertain financial future, exhibiting very little proactivity when it comes to money matters in particular.”
The study also found a clear gender divide as women felt less financially prepared than men (39% compared to 26%). This lack of security has left more than half (55%) of respondents sleep deprived as they worry about their future, affecting 64% of women compared to just 39% of men.
When it comes to money management there is a distinct difference by age, as 1 in 4 (39%) of 18-24 year olds don’t feel financially set up for later life, while 44% of 35-44 year olds don’t feel prepared for their future financial comfort.
Retirement is the top concern for Britons in 2018, followed by 23% who aim to lose weight over the coming years. However, 1 in 5 (21%) admitted to having no long-term plans at all, whether it be health, career, financial or family-related.
The study found 63% of adults live only for the moment rather than planning for the future and more than 1 in 4 (27%) feel ‘powerless’ over the direction of their lives. The issue seems to lie in the fact that 1 in 5 adults don’t save money at all and only a third (31%) proactively manage their money. The majority (57%) of respondents simply attempt to reduce their spending – a much less successful way to save.
According to Professor Vlaev, short-termist behaviour can actively trigger a reward sensation through the neurotransmitter dopamine – the feel-good hormone. This is likely to reinforce and encourage more impulsive behaviour, distracting people from their original intention and leaving them less capable of thinking rationally. An example of this is going to the pub after work, and forgetting the intention to cut back on socialising to save towards a deposit on a house.
We are a nation of procrastinators, always expecting instant gratification. The research found only 1 in 10 (10%) Britons feel in total control of their lives, due to the inability to fight their impulses.
This lack of control extends to how most people regulate the finances. 16% of Brits take a day to day approach to money management and a third of the population (34%) feels completely unprepared financially for the future or avoid thinking about it altogether.
“This study highlights that a large proportion of the UK places too great a value on immediate rewards versus longer-term plans, a symptom of over-reliance on automatic thinking or our unconscious or gut feelings,” adds Professor Vlaev.
For those who have attempted to save for their future, 15% of adults have set up automated standing orders and a quarter (28%) move different amounts of money into savings each month.
Gallacher adds, “It doesn’t need to take a huge amount of time or effort to gain a little more influence. But paying no attention to savings, investments or financial planning can have a detrimental effect and deliver a very different return than anticipated.”