Why So Many Millennials Have Nothing In Savings
So why aren’t millennials putting it away? The generation that grew up in the noughties are facing a bucket load of financial problems straight out of university – with graduate debt, lower employment prospects, a rapidly growing housing market and poorer pension provisions making the idea of a comfortable retirement seem completely out of reach for most.
To retire at 65 with an annual income of £30,000, today’s 25-year-olds need to save the equivalent of £800 a month for the next 40 years – an impossible feat for the vast majority of people. In fact, the prospect of saving enough to retire can feel so far off, many millennials are opting out of pension schemes entirely – losing their employers’ contributions in the process – and putting the cash towards paying their monthly bills instead.
According to the UK’s Institute for Fiscal Studies, the average income for those aged 22 to 30 is currently 8% lower than it was in 2008, and what they do take home is reduced even further by rising living expenses and large student loan repayments – debts of £40,000 upon graduation are all too common, and nearly a quarter of the average under 30-year-old’s monthly outgoings are on rent (although this figure is much higher in London).
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It’s not that millennials don’t aspire to save for the big things – a 2010 Goldman Sachs survey found that 93% of 18 to 34-year-olds dreamt of owning their own place – but when they feel financially doomed, and disenfranchised from growing up in the era of the financial crash, giving up and jetting off abroad can seem like a far more appealing option.
New research published by Facebook – which analysed the conversations between working-age millennials – found that they were keen on saving, when they were able to, but were wary of anything referred to as an “investment”. According to Facebook, 86% said they were actively saving for short-term goals, like holidays or purchases, but the majority were avoiding investing – half of users said they didn’t have enough money to invest, and another quarter said they didn’t know how to.
Despite having restricted means, millennials are a powerful consumer group – mainly preferring to spend their money on ‘experiences’, such as holidays, as opposed to ‘things’ (when Generation Rent have to move house every year, can you really blame them for not wanting to haul about hundreds of possessions?). Considering half of the millennials on Facebook feel they have no one to turn to for financial guidance, it’s clear there’s a demand for the financial services sector to become more digitalised to cater to their needs.
Online investment management services like Nutmeg, peer-to-peer lending groups and equity funding are growing quickly – and may soon encourage more young people to invest.
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