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Monday, 19 December 2011

Money’s too tight to mention. Some people don’t have it; others can’t handle it

I been laid off from work My rent is due
My kids all need Brand new shoes
So I went to the bank To see what they could do
They said son - looks like bad luck Got-a hold on you

This marvelous song from the Valentine Brothers, in Europe extremely successfully covered by Simply Red, described the financial problems that normal citizens experienced during the financial crisis in the mid-eighties. Although the world has changed a lot since then, a few things stayed the same.

People that have too little money to pay all bills, always try to pay the most urgent (often, but not always the most important) ones. The rest of the bills must wait… and wait… and wait. Until the sender of the bill decides that something has to be done to force people into paying. This was the case in the eighties of last century and that is again true in the tens of this new century. This can be read in the following article in the Dutch newspaper De Telegraaf:

Grid manager Liander shut already more than 10,000 households out from the gas and/or electricity supply in 2011. This number is exceeding previous years’ numbers by 4,000 households.

Liander has strong indications that many people have trouble with paying their energy bills. This was stated by a spokesman of the company, in addition to a news story on the NOS news.

This is one more clue in a range of clues that points out that 2012 will be a very difficult year in The Netherlands. People kept up appearances over the last three years and kept paying their mortgage bills and other important expenses, as they had reserves left and could fill up one pothole by creating another. 

But I have serious doubts if unemployed (or divorced) middle class people can continue doing so in 2012, as a perfect storm seems to be approaching: a serious recession (IMHO), soaring unemployment and multiple austerity programs and tax increases by the Dutch government. In the end something’s got to give. Let this message by Liander be a pre-emptive warning.

A warning of a whole different kind came this weekend from the NIBUD (The Netherlands Institute for BUDget Education).

It warned that a large part of Dutch youth – that grew up in a time of conspicuous consumption, mobile phones, internet computers and ‘surplus value’ on their parents’ homes – can’t handle money. That is not surprising at all, as nobody taught them HOW to handle money; there seemed to be plenty of it around, at ridiculous interest rates. 

The circumstance that the credit crisis is gaining momentum, confronts those youngsters with the fact that ‘the sky is not the limit’ anymore; and that’s a scary sensation. Here are the pertinent snips of the press release by the NIBUD:

There are many different levels of money handling capability among youngsters. So-called Future Planners and Managers among youngsters have developed financial knowledge and skills that cannot be found with Trendsetters and Playboys. Only 25% of the Trendsetters has its money affairs under control, against 55% of the youngsters that can be qualified as Future Planners. This is disclosed by the investigation, called MoneySkills, which is executed among 1,166 youngsters. The investigation is executed by Motivaction in close cooperation with the NIBUD, acting upon instructions from the Know-What-You-Spend foundation (WWJB). It’s the first investigation in kind that maps these skills.

Thea Hazel-Stals, director of this foundation:”  The NIBUD defined what skills you need to posess to be adequate in handling money affairs, the MoneySkills. There are youngsters with a certain approach to money (the so-called MoneyMindsets) that are doing fine, but others score very poor results. We scored the skills of youngsters against our MoneyMindsets. The Trendsetter-type and the Playboy-type have hardly an overview on income and expenses. And they can hardly withstand temptations. The true Playboys and girls are in only 7% of the cases capable of saving and financial self-control. The future-planners, however, score over 45% in this area.

Youngsters become more financially skilled after their 19th year. Especially in the period before this age (16-18), youngsters are the least capable in handling their money and experience most difficulties. 42% of the youngsters never plans its expenses. They consume casually until all money is gone. Almost 50% of the youngsters never looks ahead. Only 6 in 10 youngsters save. The rest does not. About a quarter of the Trendsetters and Playboys spends – in case of a windfall revenue – almost directly the total amount. And while working, more than a quarter of the youngsters doesn’t know what salary they earn.

In the years before the credit crisis came, I secretly wished for something like this to happen (by the way; not to this level – EL). These were the years that you could get your money at the bank ‘for free’ and that children had those ridiculously expensive game consoles, €500 cell phones, PC’s and television in their bedrooms and many more signs of conspicuous consumption.

Children were really not able to handle money and spent for instance thousands of Euro’s on holidays, expensive hobbies or visits to pubs. Many youngsters and students had bills of €1000+ euro on their cell phone subscription and some youngsters were so indebted that it will cost them 15 years to get out of this misery.

I truly hope that these times are over and I really hope that parents teach their teenagers again what the true value of money is; that they can spend it in a minute, but that it will cost them lots of sweat and hard work to earn it back. That would be a healthy side-effect of this credit crisis. As, like Mick Hucknall sang: ‘Money is (still) too tight (to mention)’.


  1. Thanks Ernst,

    I just discovered you blog and am now following it daily. I really appreciate your incite into the economy and your ability to analyze the misinformation put out by the media and the governments. You are very skilled and I admire your work.

    Thanks again for your effort.


  2. Thanks for your friendly words, Marc. I appreciate them very much.

    The problem with the authorities is often that everything they say, affects the markets and also their chances of re-election.

    So almost all authorities are trying to blame others for the problems in Europe, instead of looking for a real solution that helps everybody.

    And concerning the media; I need them every day as a source of information and inspiration.

    On the other hand I noticed that media are not always checking their facts thorougly and not always try to grasp the unobvious truth behind the obvious data.

    I hope you stay tuned as a reader and if you have any suggestions, please feel free to mail them to me. You can find the emailadres in the blogger profile