Are young people savers or spenders? This is a time-honoured question: one with connotations of footloose and fancy free young people spending every last penny of their income on socialising and staying in the here and now. But is it really that simple?
The latest of our Young Money reports “Generation A: From Austerity to Aspiration”, which looks at the attitudes of 18 to 25 year olds to a range of financial topics, including pensions, saving and spending, investing and advice and access, actually questions this orthodoxy, scrutinising the reasons behind this and looking at what more might be done to foster a greater savings culture among this age group. The report uses the term ‘Generation A’, which highlights the fact that this age group has spent most of its working years in the shadow of austerity.
So what does the report actually find? Far from being anti-saving, Generation A is in fact very clued-up about the benefits of regular saving, with over a third already saving into a bank or building society account and a quarter into an ISA. It revealed that 85% had savings of some kind, and on the whole, women were more likely to save than men (their average savings amounted to £3,391 compared with £3,274 – the national average was £3,356). So it would seem we have a budding generation of savers rising through the ranks. However, other research by Nationwide (whose Head of Mortgage Strategy and Policy, Andrew Baddeley-Chappell, contributed to our report) hinted at obstacles: it suggested that in practice Generation As are not in a position to make regular savings, despite their best intentions.
So there is clearly a gap between young people’s aspirations and what they are actually achieving financially. And what is causing this? According the report, there was one overwhelming factor: lack of disposable income. Almost half of Generation As questioned in the survey (42%) stated that they did not earn enough to put any away (this figure rose to 63% among young Scots).
This is not surprising. Generation A has been disproportionately affected by the fallout from the financial crisis. House prices remain out of reach for all but a privileged few, the in-work employment figures for younger people are still below that of 2008 and many have had to take on huge debt to fund themselves through university. This has inevitably put pressure on the incomes of those in this group. And sadly, this is impacting on their ability to meet their savings aspirations. In our next blog, we’ll be looking at the consequences this is having on Generation A and how we mitigate the worst of these.
MRM will be hosting a panel debate on its recent Young Money report with the Chartered Institute of Securities and Investments on Wednesday, 6 April from 6:15-7:45pm. For more information, or to come along, please email email@example.com