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An accident of birth
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I am a baby boomer.  I make no apology or claim no benefit for this.  It is because I was born at a certain time – it is an accident of birth.  Like many of my generation, I have concerns and worries.  Health, wealth, happiness, offspring and so on.   Some but not all of my generation have enjoyed the 40 year job plan and will be able to retire on so-called gold-plated final salary pensions in due course.  But over the past 20 years or so, particularly in the private sector, these privileges have been withdrawn.

The one saving grace of the baby-boomer set is our property.  People in the UK have become asset rich in property and pension but cash poor, as we have written here .

If you are lucky enough to have bought wisely, stayed married to the same person and kept your job, it is likely your house value will have substantially increased and any mortgage on your house will have all but disappeared.   Even if you have had a more chequered time, you should still have substantial equity in your house.

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Principled money posts of the week #5: pensions, saying ‘no’ and choose Scrooge not Santa
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Another weekend brings entirely different concerns. There is a joke about the UK, which many British people don’t seem to know or remember. It is about the newspapers, several decades ago, publishing a report according to which ‘…because of the fog the Continent is isolated’. It seldom occurs to many people here that they may be isolated. Well, after last week’s events and the considerable political foresight and maturity demonstrated by our Prime Minister, the Continent appears to be isolated again.

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Castles and homes: when does it make sense to rent?
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Castles and homes: when does it make sense to rent?

Sometime ago the Office for National Statistics published its report Wealth in Great Britain: main results from the wealth and assets survey 2006/2008. According to it on average half of our wealth is tied in non-income generating real estate; or put in another way in our houses. This should not come as a surprise: people in the UK see their houses mostly as an investment. More seriously, we see our houses as our main investment. Our houses are our castles and paying off the mortgage gives us a sense of security and achievement.

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Match made in heaven: the beauty of Zopa finance is, it cuts out the bank ‘middleman’!
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Match made in heaven: the beauty of Zopa finance is, it cuts out the bank ‘middleman’!

This article is written by Rebecca Boden; professor in management accounting and Money Principle Master Extraordinaire.

Have you ever wondered what happens to the money that you have in the bank? Disappointingly, they don’t keep it in a giant sock under the bank’s bed.

Banks make some of their profits by borrowing at a lower rate of interest than they lend at and keeping the difference. Most, if not all, current accounts pay no interest to the person who owns the money. And at the moment, bank deposit accounts (savings accounts) pay a very low rate of interest. This means that banks get to use our money for free or very cheaply. Unfortunately, our generosity to banks is not reciprocated: they lend the money that is in our bank accounts onto other people at quite high rates of interest.

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