People are consistently underestimating the cost of life’s big events, according to new research from HSBC.
On average such events cost £314,000, however Britons estimate the cost will be just £190,000, a shortfall of £124,000.
The key milestones that Britons most underestimate the cost of are raising their first child, underestimated by £116,000, the cost of a wedding, a shortfall of £11,000, and student debt which is underestimated by £9,000. However, Britons vastly overestimate the average cost of a first house deposit (by £9,000) and the average cost of a first car (by £2,500).
The survey of 1,000 UK adults also found that more Britons plan to pay for life’s big events using savings than those who have already achieved them. This is true buying a first car (savings up 8%), paying for a wedding (7%), having a first child (savings up 9%) and sending a child to university savings up (16%). However less people intend to pay off university debt by saving (down 7%) or to raise a first house deposit by saving (down 10%).
Brits undervalue the cost of raising a child by over £100,000. The average estimate was £85,788 whereas the actual average cost of raising a child is £201,809.
Richard Brown, head of savings at HSBC, said: “Life’s big events can be expensive and many who are yet to undergo them are significantly underestimating the costs involved. The reality is that some people may have to postpone some of these key milestones unless they fully understand the budgetary implications and start planning their finances or saving earlier.””
