Why are hipster finances unique?

Written by Rebecca O'Connor on 7th November 2016

Good With Money has just published a FREE guide to hipster money. Download it, read it at your leisure.

Why do hipsters have unique financial circumstances?

Three reasons: their economic circumstances, values, and (albeit reluctant) dependence on digital technology for much of how they interact.

The hipster age group – people in their 20s and early 30s – is a sub-section of a wider demographic group known as the “millennial” generation to marketers (but clearly, they do not refer to themselves as such).

Born at the wrong (economic) time

Millennials, hipsters or no, face some unique economic challenges as a result of when they were born.

One is extraordinarily high student debts. They went to university at a time when tuition fees were a thing. Typical debts are now more than £44,000 when someone leaves uni, according to the Institute for Fiscal Studies. Hardly a flying start to finances in adult life. Such astronomical debt levels have fundamentally altered this generation’s perception of money management and wealth, turning wealth into a constantly deferred pipe dream and money management an exercise in debt minimising, rather than wealth creation.

Another is difficulty entering the job market. Endless internships and low starting salaries are standard and the deferral of proper recognition for one’s abilities, ie. Promotions and pay rises, is the lot of many a millennial.

Another is the high cost of housing – when faced with rents that are higher than home ownership costs in most locations, young people rightly feel that the balance of housing power is against them and insurmountable. Many no doubt feel guilty about waiting for granny to die before they can even think about getting on the ladder. Very high house prices against modest earnings exacerbate this sense of financial impotence and desire to spend, because “I may as well”.

The high cost of living – Or let’s be honest, it’s the high cost of living if you include cafes, ubers, nice clothes and travel. As a VICE reporter put it in a recent podcast entitled “Is it OK to live your entire life in debt?”: “Who are these people who might never have any wealth, but act like they are rich?”. Well, more than we’d care to admit in this age bracket, actually. Because when you work hard, you think: “yeah, I deserve this” as the journalist Hazel Sheffield put it. And you might. But you still can’t afford it.

There is almost £0 left to save. Saving and investing might be something that more flush hipsters can secretly manage, but for the most part, if you are part of Generations X and Y (don’t even ask about Z), you perhaps feel like any amount you can save is so tiny as to be not worth it. So you spend instead, descending into a self-fulfilling vicious cycle of spending because you think you will never have enough to save, therefore you never have enough to save). But it doesn’t have to be true. Difficulty saving is therefore another financial trope of this demographic.

Such financial challenges give rise to feelings of despondency and disempowerment and to the conclusion that “I might as well spend it.”

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Why Hipster luck is coming in

The good news is that the tide is turning for this generation and it looks like, after a bleak start to adult life, things are about to get a lot better – if you can be one of those to make the most of the changes that are happening right now to ISAs (tax-free savings), workplace pensions, digital money management and some heavy targeting from the financial services industry, as it wakes up to the need to start engaging with younger generations.

Time is on your side.

And yes, you might have tons of student debt but let that be a deterrent for other kinds. The advantage of renting is that you don’t have to spend money on repair work, painting, furniture, etc. All costly things that many older people rely on personal loans to fund. Lucky you, you don’t have that baggage. Now it’s time to make the most of it!

The financial services industry is beginning to recognise that the asset-rich older generation that has served them so well is getting older and will start to transfer wealth down through their families before they die. This means challenger banks and mainstream ones, wealth managers, investment platforms and new start-up apps, have started focusing their attentions on the younger generations instead.

Greater availability of values-based finance options

True hipsters wear their values on their sleeves. Yes, you want to look good and have a great social life, but with a nod to deeper concerns.

Locally sourced food isn’t just fashionable because of fashion, it is fashionable because people are genuinely thinking more carefully about food miles and supporting local economies.

The focus on second hand and vintage fashion among hipsters reveals an understanding of value that is not just about getting a bargain, but the benefits of buying into lasting quality.

Research suggests that if you are a hipster, you are part of quite a socially responsible bunch, preferring brands that reflect your desire for a better world. H&M’s conscious clothing range is one example of a retailing giant catering to this desire.

But so far, this social and environmental awareness and willingness to do the right thing, while it has fed into food and clothing choices, has not translated (at scale anyway) to the way young people manage their money.

One reason for this is a lack of transparency – banks don’t tell us what they do with our money when we put it in there every month, because why would they?

Another is lack of choice and access – those providers that do offer genuinely socially and environmentally beneficial options are not at the top of every Google search you make when looking for insurance, savings accounts or a mortgage. Instead, you are delivered the cheapest deals through price comparison sites. And without doing lots of research on your own, it’s hard to step off this path to purchasing financial products.

A survey by Triodos Bank found that millennial (under 35) investors want their money to make a positive change to society and the environment but many have never been offered opportunities to invest in Socially Responsible Investment (SRI) funds.

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Six out of ten (63%) of millennials would like their money to support companies which are profitable and make a positive contribution to society and the environment. Millennials (60%) said that they would move their money if they discovered it was being invested in companies that conflicted with their personal values and ethics.

Financial services providers that embody the idea of long-term, good value are out there – but they’re diamonds in the dirt. Read the guide for our list of good (and bad) eggs.