Personal Account

When it comes to being prepared for a crisis, my father’s right: the oldies know better how to cope

Since I became a personal finance journalist, my parents have relied on me to help them with their money. But given the month we’re about to face I was thinking about how I’d navigate my own way through this cost of living crisis and I found myself needing a more experienced viewpoint, so I turned to Dad.

Semi-retired and living in a draughty old house, he faces soaring energy bills and National Insurance contributions from next year, along with myriad other price rises. But he was largely unconcerned – after all, he has seen much, much worse. “I lived through the 1970s and 1980s,” he told me in his sanguine tone. “Now that was a disaster.”

It’s a common refrain of the older generation that they suffered through sky-high interest rates and low wages, while we millennials have it so much better. That is debatable. But here, my dad has a point.

According to Capital Economics, the consumer prices index measure of inflation was far higher in the 1970s than it is forecast to be this year, thanks to two oil price shocks. It is currently 6.2pc, the highest level in 30 years, and the Bank of England has said it will hit 7.3pc next month. But in August 1975 the rate was 25.3pc, and in April 1980 it was 15.6pc. Back then, despite higher wages, real take-home pay fell by 9.5pc.

The fact is, young people have no real experience of managing prolonged periods of inflation or out- of- control energy bills. Nor do we have any memory of high interest rates. In 1975 the Bank Rate was 11.5pc; now it’s 0.75pc.

My generation may think the financial crisis was enough for them to have a in- built resilience to financial shocks. Back then, unemployment hovered between 6pc and 8pc, but was as high as 20pc for those who’d just left school or university. At the lowest point, in February 2009, real wages fell by 8.6pc. But whatever we believe, this has not given us the tools to manage the approaching disaster.

This lack of experience has also led to complacency and plenty have not fully digested, accepted or planned for what is coming. You can perhaps include my dad in this cohort. But when the crisis finally dawns on those who think it will pass without impact, my father’s generation will be ready. I fear mine will not.

They may have felt the rising price of food and eating out. But, as the newest energy price cap takes effect and their mobile contract soars in price, those abstract numbers we have been warning about for months will become a reality. This is before housing costs such as mortgages and rents quickly become unaffordable.

Too many of us are not prepared to withstand the coming storm. The best advice I can give to my generation? Ask your parents and grandparents.

‘I lived through the 1970s and 1980s,’ he told me in his sanguine tone. ‘Now, that was a disaster’

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