Value of money falls by two-thirds in last 30 years

The relative value of money has reduced by 67 per cent in the last 30 years.

Research by Lloyds TSB, which analysed data produced by the Office for…

The relative value of money has reduced by 67 per cent in the last 30 years.

Research by Lloyds TSB, which analysed data produced by the Office for National Statistics, uncovered the worrying discovery and it points to the fact consumers have seen their spending power drop dramatically over the time period.

For example, the average price of a detached house is six times higher than it was back in 1982. On top of this, a person would need to have £3 million to enjoy the equivalent lifestyle of a millionaire did 30 years ago.

It means the purchasing power of money has eroded at an average annual rate of 3.7 per cent over the past three decades.

The decline is set to continue

Nitesh Patel, economist at Lloyds TSB Private Banking, said: "The value of money has fallen substantially over the past 30 years as retail prices and the cost of many everyday items has soared.  Someone today would need nearly £300 to have the same spending power of £100 in 1982.

"Looking to the future, even if inflation is kept firmly under control and rises only in line with the government's target, it is likely that the value of money will continue to reduce significantly and decline by more than half its value by 2042."

If retail prices were to increase at a rate of 2.8 per cent a year for the next 30 years, there would be a further 56 per cent fall. This highlights how serious the issue is, as the drop in the value of money comes at a time when many consumers are struggling to get by.

Consumer spending takes a hit

Indeed, people are being left in a vulnerable position because their spending power is taking a hit, as research from the firm points to the fact that 53 per cent of UK adults are going to use their savings in 2013 to help them get by.

On top of this, 11 per cent of respondents expect to rely on their rainy day fund every single month of 2013.

Andy Bickers, savings director at Lloyds TSB, said: "The nation's wallets have been under much strain for some time now, so it is not surprising that savings have moved down the priority list for many. Although, it is encouraging that so many agree that it is important to save, it is clear that many are struggling to do so in the current climate."

Help is at hand

If people are struggling to make ends meet, they should seek debt advice at the earliest opportunity. By taking out a debt management plan, consumers will be able to reduce their monthly repayments and creditors should stop hassling them.

In order to qualify for the measure, most individuals need to be able to afford to pay £100 a month, have debts above £1,500 and owe money to more than one creditor. If their debts are more serious, an individual voluntary arrangement could be a more appropriate solution.

By James Francis

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