Millennials believe they’ll be worse off as a result of political earthquakes such as Brexit and Donald Trump, according to the new “Young Money” report from the consultancy MRM.
The report features comments from Iona Bain, founder of the Young Money blog and recently named Money Blogger of the Year.
Nearly half (48%) expected to be much worse off or slightly worse off following the result, while 13% said they were put off saving by uncertainty about the future of Britain. Those aged 18-20 were most likely to be put off saving as a result, with 16% in this age group expressing concerns. Regionally, those in Scotland were most pessimistic about their financial futures following the vote for Brexit: 60% expected to be much worse off or slightly worse off, with just 6% believing they would be better off. Those in the West Midlands were most hopeful following the referendum, with nearly a quarter (23%) expecting to be better off. However, 41% of those in this region thought the result would have a negative impact on their finances.
However, despite the financial doom and gloom following the vote, it seems Generation A still has financial goals and aspirations. Getting on the housing ladder was rated the top financial priority for this age group, with 30% expressing a desire to buy a property. However, stubbornly high house prices, low interest rates, and the need to save a large deposit for a mortgage means many may experience difficulties in attaining this dream. Young women were more likely to prioritise this: 34% of them named this as their top priority compared with 25% of young men. There were also some regional variations: in East Anglia, 44% regarded it as their top financial priority compared with just 14% in the East Midlands.
A fifth (20%) said they were saving for a specific purpose. This was highest in Northern Ireland (32%) and lowest in the East Midlands (14%).
Pensions fall much further down the list of priorities for Generation A. Just 5% said their top financial priority was saving for retirement. However, this figure increased when we looked at older cohorts, suggesting that this does rise as people age: the proportion of 18-20 year olds who counted this as their top priority was 3% while for those aged 24 and 25, this had risen to 7%.
However, as has been mentioned, 24% of those surveyed were not saving at all. Young men were less likely to be saving than women, with 27% saying they are not saving, compared with 21% of young women.
So, what is putting them off doing so? Many Generation As are being prevented from reaching key milestones by other pressures on their income. More than a quarter (26%) of Generation A say that clearing their debts (including student debt) is their top priority. Similarly, low wages are affecting young people’s ability to save. Nearly half (47%) of those who were not saving said it was because they didn’t have enough money to do so. The situation was even worse for young Scots: 67% said that they didn’t earn enough to start saving.
A lack of confidence and understanding of financial products was apparent in the research. Of those who were not saving, 29% said they didn’t understand enough about investing to feel comfortable doing it. Again, this figure was considerably higher among young women (36%) than young men (23%) suggesting that more could be done to educate women about investing.
Of those who were saving, almost four in 10 (38%) were saving into a bank or building society account, with a further 29% saving into an investment product such as an ISA.
“The media has heavily focused on young people’s shock and bewilderment at the vote for Brexit. In reality, our goals remain unchanged; the fact that only 13% of us have halted our savings suggests that we’ve become used to living through economic turmoil. Likewise, 30% of us are still determined to save up for a home, despite the vagaries of the housing market and the possibility that we jeopardise other goals in the process.
Stagnant wages and high living costs mean we have to prioritise. Since rents remain horribly high and many tenancy agreements are on (what my mum calls) a shoogly peg, home ownership seems to provide a degree of security that is positively Elysian.
And let’s face it, it’s no good for the older generations to denigrate this goal when they have benefitted so much from it.
The fact only 5% of us save for our pension is no surprise. We’re now expected to provide the bulk of our retirement savings from a far earlier age. It still won’t be enough, of course, but many young people aren’t even meeting the bare minimum. It’s not all their fault; pensions are rigid and archaic structures that require urgent reform. The Lifetime Isa obviously won’t be the answer. We need more flexible options and better education in the workplace rather than outdated lectures from the financial sector about how we need to give up Sky and booze.
Research increasingly shows that young people are becoming more pragmatic in their outlook. Perhaps the notion of “personal responsibility”, previously associated with selfishness and greed, will become more acceptable. The financial sector needs to do more to educate young people so that, even if they regard Brexit as bad news overall for the economy, some can snatch victory from the jaws of defeat.”