Today’s young people have been disproportionately hit by the financial crisis. This age group suffers from high unemployment, with levels of young people in work still not returning to their pre-crisis high, as well as poor job security. It is also increasingly being shut out of the housing market, instead being forced to rent at ever-rising prices. At the same time, many of the benefits enjoyed by their parents’ generation, such as free university education and in many cases, generous, defined benefit pension schemes are no longer available to them.
According to recent research by the financial services agency MRM, 36% of young people feel they are worse off than their parents at the same age, which highlights that the current generation is far from certain about its financial future.
Is this generation at risk of becoming a ‘lost generation’? In many ways, the facts speak for themselves. Levels of debt are high – according to Citizen’s Advice unsecured debt among 17-24 years old averages £12,215 – and levels of engagement and trust with financial services are low. However, this is not the full picture. MRM’s research found that young people are actually very keen to save and well aware of the need for early, regular saving. What is holding them back is a lack of disposable income – 43% said they didn’t earn enough to save and a lack of confidence in how products work – 20% said they were confused about how pensions worked. All the evidence indicates that while they would like to engage with the banks, they are simply unable to because of circumstances.
This is very concerning. Anecdotally, their parents’ generation readily admit to being less than clued up about financial services when they were the same age – and even a little irresponsible with their money. Conversely, today’s crop of young people are actually keen to learn more about financial services, but sadly they are shouldering so many other financial pressures that it is not easy for them to apply the knowledge that they learn. MRM’s research found that 22% would be interested in free workshops on managing money. It is a double-whammy for them: they have lost the advantages their parents took for granted, but are being expected to manage their financial destiny by themselves – all in a climate of financial uncertainty and rising inflation.
Worrying social effects are emerging as a result. Young people are being forced to put off major life events, such as marriage, starting a family or even moving to a place of their own – the proportion of young people aged between 18 and 34 hit its highest level since records began last year, while the average age of first time parents and those getting married have both risen over the last 20 years. Moreover, debt charities are seeing a sharp increase in younger people contacting them for advice – higher than any other age group. Meanwhile mental health is becoming such a concern that MoneySavingExpert’s Martin Lewis has set up the Money and Mental Health Policy Institute, to research the links between money management and mental health issues.
Economically, these trends are also concerning. Too many young people are either out of work or overqualified for their jobs (one in six workers in the general population are overqualified according to the latest ONS figures). Over the short term, this leads to a decline in productivity and pressures on individual income. Over the longer term, however, this threatens the very fabric of our society. A failure to match up to the standards expected of them by their peers and their parents can only be damaging, leading to reduced aspirations, pressure on support services and an increase in unsociable behaviour caused by young people with too much time on their hands. Surely it’s only a matter of time before young people lose patience.
The Lifetime ISA unveiled by the Chancellor at this year’s Budget and his assertions throughout that this was a budget for the “next generation” are encouraging signs that the Government is recognising these disparities between generations. This may well have placated a few young people for now. However, it will take far more than a few headline grabbing initiatives for today’s young people to feel they are being given access to the future they deserve.