The personal life cycle

Introduction 

People at different stages of their life have different financial circumstances. They will have different amounts of money coming in e.g pocket money as a child and earnings or benefits as an adult. 

How they use their money will vary depending on what they spend, save and repay on debt e.g living at home with their parents, young adults will not have financial responsibility for paying household bills. Once they leave, they will have to pay for rent or mortgage and other utilities.

When planning current and future finances it is useful to consider the financial circumstances that tend to apply to each life stage and the financial consequences of possible life events. 

For example, young adults may want to plan to leave home, to become independent of their parents, or to move to a different town or to look for work or go to university.

This may involve investigating sources of money coming in and possible outgoings such as paying day-to-day costs, for example, mobile phone charges and saving for the future.

Financial services such as banks, building societies and insurance companies offer products that are designed to enable people to pay for the life events that tend to happen at different life stages:

• Mortgage
• Personal loan
• Savings account
• Credit card 
• Life assurance

The Life Cycle

LIfe cycles are broken down into life stages based on age.

This outlines the typical life stages (there is some overlap in age ranges at the teenager/ young adult stage because a person is legally an adult from the age of 18 but is still a teenager)

Birth and infanthood: 0-2 years old 

Childhood (preschool): 2-5 years old 

Childhood (school):5-12 years old

Teenager:13-19 years old 

Young adult:18-25 years old

Mature adult: 26-40 years old 

Middle age: 41-54 years old

Late middle age:55-65 years old 

Old age: 65 onwards

Death: Possible at any age but more likely here

At each stage, people tend to have different:

• life events
• levels of income
• levels and patterns of spending 
• amounts of savings and attitudes towards savings
• amounts of debt held and attitudes to debt
• family sizes and structures 
• levels of education
• attitudes to risk (and to the future)

Paying for needs, wants and aspirations 

There are 3 main reasons why people might want to spend money:

• To pay for needs, items people must have to survive e.g food, drink and a place to live. When planning finances, these are paid first.
• To pay for wants, items that are desirable but not necessary e.g cinema tickets
• To pay for aspirations, items/ experiences people wish to have in the future e.g holiday

Life Events

In the early stages of an individual's life, the costs of needs, wants and aspirations are met by their parents/guardians and other relatives. Children are dependents: people who have to rely on someone else for food, warmth, security, health care, etc. 

In later life stages, the individual is usually responsible for meeting these costs for themselves, although they may become dependent…