As if saving for a first home wasn’t hard enough, today’s young adults have had to face a chorus of disapproval from baby boomers who think they’re lazy spendthrifts. But the Millennial Money Survey reveals the real reason why saving today is so hard.
Young people face an uphill struggle to achieve the traditional life goals such as starting a family, according to worrying new research by a leading investment trust. The Millennial Money Survey by the Foreign & Colonial Investment Trust has revealed that 18-35 year olds are at risk of failing to achieve their plans due to their lack of savings or investments.
The study initially looked at the life goals over over 4,000 adults aged 35 or younger. It turns out that these goals largely remain the traditional ones: owning a home, getting married and starting a family (64 per cent), with other popular goals including travel (42 per cent) or simply buying a car (26 per cent). However, the survey also found that an estimated 7.8 million millennials lack any form of savings or investments, making it potentially much harder for these goals to be achieved.
Smashing the avocado stereotype
Millennials have come under fire in recent years from those of the older generation who consider that they spend too much on luxuries (‘smashed avocado’ being a notorious example) and fail to maintain good saving habits. However, this study appears to refute the myth that the millennial savings crisis is just down to poor self-discipline. A large majority (68 per cent) have firm plans to save more this year than last year, with strategies including eating out less and cutting unnecessary spending such as takeaway coffees (30 per cent).
Rather than luxury spending, it's factors such as bills (61 per cent), low earnings (41 per cent) and debt (39 per cent) that millennials identify as some of the main barriers to saving. They also prove to be more debt-averse than the stereotype might suggest, given that 60 per cent do not have an overdraft and 40 per cent do not even have a credit card. However, those avoiding credit cards from a sense of prudence may be unwittingly harming their chances of buying property in the future, as they will not have a detailed credit history (which can harm their credit score).
Six out of ten millennials also said they would rather miss out on social occasions than borrow money – indicating strong levels of financial responsibility.
Millennials have a mountain to climb
High outgoings and limited income are however not the only factors deterring millennials from saving. A significant number (32 per cent) are put off by the perceived risk of losing money through investing, while almost as many (30 per cent) feel hindered by their limited knowledge of finance.
A report from the Chartered Insurance Institute confirms that getting on the property ladder is the top priority for many millennials, but puts out that it now takes an average 24 years to save up enough for a deposition on a first home – a staggering eight times longer than the three years it took back in 1997. This in turn reduces the likely amount of equity that people will have in later life, even if they can afford a home, making it all the more important to build up substantial pension savings.
Ross Duncton, head of marketing at BMO Global Asset Management, said: ‘The majority [of millennials] are far from a reckless generation. Most are sensible spenders who want to take more control over their money, despite a lack of formal financial education and income. They simply aspire to achieve what previous generations have enjoyed. Many only need to shift their money mind-set slightly to get their money working harder.’