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How much wealth do I need to not be relatively poor in the UK?

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Your average person still owns a home and average wages are between 20-30k so about £200k. That being said there's a cliff around the 40% percentile mark where people don't own homes but will have savings.

124k is the average net worth of an individual. You have to remember some parts of the country are really struggling. It's an average but for a prosperous city you might be right.

Reply 21

username1148663

Wealth top 15% is probably nearing a million pounds as wealth would include their property

Reply 22

Reue

There's a commonly used formula in the personal finance community:

Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be.

Above that and you are doing well. Below it and you're not.
Unfortunately it doesn't really take into account that young people may have gone to university and so could be on a high salary but with a low net worth as they havnt had as long to accumulate it.

Some other common benchmarks are to have £35k in pension funds by the time you're 35 and earning your age as a salary (so £25k for a 25yr old).

There's a great book containing alot of research on wealth. Gathered mostly in America in the 1990s; much of the content is still very relevant for anyone interested in finding out more

The Millionaire Next Door

(edited 8 years ago)

Reply 23

Quady

Original post by Rakas21

Aren't there about 27m households in the UK and over 60m people?

Of those 7/10 are owner-occupiers

Of those 50% have mortgages

Reply 24

Rakas21

Original post by Quady

Aren't there about 27m households in the UK and over 60m people?

Of those 7/10 are owner-occupiers

Of those 50% have mortgages

Something like that. I know the last census found an ownership rate of 59% which was a fall from the 01 peak.

Reply 25

angelicajreid

Original post by Doctor_Einstein

How much wealth would I need to be no longer poor, say in the bottom 15% of UK citizens?

Would I be poor (as defined above) if I only had 60k in the bank?

Also how much in the bank would I need to reach median wealth?

And finally how much would I need to be rich? (say top 15%)

Ok I think the other answers assumed you meant income, but what you wanted to know is how much do I need to live off the income generated from wealth (ie investments) in the UK slightly above the poverty line. Although the way the question is phrased is "not be relatively poor" which is very subjective to your lifestyle. Let's be honest living at the poverty line means you can barely feed, cloth, and house yourself, and arguably where that line is fluctuates if that is actually true (inflation, cost of living, etc). Living at the poverty line means very unstable and fragile living conditions that can be easily upset by simple financial changes. So what you consider a decent living and more importantly a stable living is your definition that we can't decide for you.

I'll give you a framework for figuring this out and an example, but it'll be up to you to really plugin the right numbers. From the other answers poverty line in the UK is 14.000£/yr. So let's see what it'll require we save in order to earn that in a year. So a little math P is our principle we invest. P is some savings we have that we are going to invest in something to generate interest we'll live off of. I is the percentage of interest we earn by investing that money, and M is the money generated every year from that investment. So our formula is:

M = I * W

Now an example. So let's say we want to ear 14.000£ every year we can live off of. And we'll assume a 6% return every year how much money do we need (ie solve for W). Rearranging our formula we get:

W = M / I

Subsitute:

W = 14.000£ / 6 / 100
W ≈ 233.335£

So you'd need to have 233.335£ invested generating a 6% (=6 / 100) return every year to generate 14.000£. So let's move off the poverty line and say 20.000£ because living at the poverty line is very fragile.

W = 20.000£ / 6 / 100
W ≈ 333.335£

Now the question is what investment would give you a 6% return? Unfortunately saving accounts, CDs, and other more safe investments are yielding like 1-2% right now. Those are your safest bets because you are guaranteed those rates of return (I) without your principle loosing value (P). Other options would be to purchase property and rent it, and the rate of return on those investments really depends on the rental environment. There are lots of other fixed asset options, but access to them requires research. Fixed assets, like houses, mean you may not be able to quickly sell them to get money if you suddenly need it.

Stocks and bonds are other investments, but more subject to change over time. Stocks of course being the most volatile, but over the long run you can expect your principle to grow. If you picked stocks you'd want to invest in stocks that provide a dividend so the underlying value of the stock is less of an issue over the long term. Bonds are a good option if you plan to hold them until maturity. But if you need this money (P) anytime during the lifetime of the investment you may have to take a hit on the value at that time. That's more of a reason to make sure you have some savings set aside (ie not invested) in case you have a pull out money for something. AND that's why you don't live near the poverty line if you can prevent it because poverty line means NO means to absorb those hits.