Bonfire of the savings habit for GenY

Written by Lisa Stanley Mann on 10th October 2016

No money to spend; no money to save. Sad but true: it’s the sorry state of affairs for millennials today.

With the cost of living continuing to sky rocket, it’s no wonder so many under 35s feel forced to ditch the thrift and instead live for the moment.

Something is rotten in the state of today, when a whole generation is forced to change the habits of a lifetime.

It could be rebellion, of course, it could also be entitlement, but the statistics speak for themselves: 37 per cent of under-35s say that, due to a number of factors such as high levels of debt, the cost of living and rising house prices, they prefer to enjoy today the little money they do have, rather than save or invest it for the future.

The research, from Investec Wealth and Investment, also underlines how reliance on debt is eroding the savings culture among millennials: 27 per cent of under 35s think there is little point in saving because debt is unavoidable. Twenty per cent of under-35s think they will never be debt-free.

Yet nearly half of millennials cite today’s ‘buy now pay later’ culture as a factor accounting for the decline of thrift.

Chris Aitken, Investec Wealth & Investment’s head of financial planning, says: “The culture of thrift has declined in recent years among young people because they have become more reliant on debt to finance their lifestyles.  University fees mean that debt is part-and-parcel of many young peoples’ lives long before they contemplate taking on a mortgage.

“But given how much is required for a house deposit it’s easy to understand why so many millennials don’t see the point of saving for one. There’s a danger that this mindset becomes fixed for life.  Our advice is to start saving and investing what’s affordable as early as possible.”

Here at Good with Money we’ve blogged a lot about just how hard it can be to be financially prudent and get into the savings habit. Faced with university or other debts, saving for a home or simply meeting the monthly rent bills, possibly paying out for kids, or even just affording the odd Deliveroo, all mean that saving anything is virtually impossible.

Even saving pennies through an app like Moneybox could add up to something relatively substantial over the course of a year.

So here’s our top five tips to instilling some thriftiness into your finances:

  1. Read our new guide to finances at 40 – even if you’re only 27 and 40 seems light years away, it might offer a good perspective on funding a basic standard of living when you are older.
  2. Get an app to do it for you. There’s a whole host of new apps that will take the hard work out of sorting out your cash. Moneybox rounds up money spent on your debit or credit card and puts the remainder from each purchase into an ISA account. Pretty cool. Cleo is a free ‘intelligent assistant’ for your money which accesses your transaction history to deliver relevant insights into your finances. The app will give you detail on your spending and can pro-actively help you save if you want to.
  3. Think beyond the transaction when it comes to every aspect of your finances. If you want your meagre money pot to work harder for you, then give it some due thought. If you don’t like the idea of your money being used to finance fracking (more on this soon) or animal testing, then you can switch to a bank that doesn’t fund these types of activities.
  4. Get a pension. Really. It’s almost like free money. In fact, come April 2017 all eligible employees will be automatically enrolled into their company’s pension scheme. So if your employer is making contributions for you, plus with the government’s tax relief, you could be missing a trick if you don’t try to set aside enough each month to make up your share of the contribution. But do also use as much of your ISA allowance as you can, as you don’t pay tax on these contributions, either.
  5. It may sound counter-intuitive, especially in a blog about thrifty finances, but don’t always go for the cheapest deal or best rate. Often the cheapest deals promoted by the big price comparison websites offer short-term high rates or discounted deals to get as many customers in as possible. Often these companies chase new customers willy-nilly (read about Extra Energy, for example), but are not necessarily set up to deliver the same level when it comes to customer service. If a company offers a rate that seems almost too good to be true, it probably is, and there’s every chance it will drop off a cliff when it comes to the end of the offer period. If you’re not in a position to spend precious hours keeping a close eye on each and every aspect of your financial affairs, then you may get stung.