Young people are more money-savvy than you think
Guest blogger Paul Godwin of Aviva looks at a campaign aimed at helping younger people make the most of their money.
Young workers in the UK today have never had it so bad. Well, that’s what you would think if you believed what you read in the media most days.
The image we see frequently portrayed in the media is that of a generation of young people who are all saddled with thousands of pounds of student debt and struggling month-to-month on low incomes. At the same time, they are being hit by a double whammy of rising rental prices and higher deposits on mortgage deals. Yet some commentators speculate that, instead of buckling down to plan their way out of this, many are actually racking up more debt to meet their lifestyle expectations now, rather than planning for their future.
Living for the moment?
Research conducted by Aviva into the financial habits of the UK’s 25-35 year olds (we’ve called them the foundation generation) showed that the truth is remarkably different. We found that the foundation generation are, in most cases, financially engaged and serious about planning for their future. Rather than living just for the moment, they are actually laying the groundwork for their finances and developing their careers while managing their debt and budgeting their day-to-day spend.
Of course this generation has been adversely affected by the difficult environment in which they are establishing their careers. Indeed 89% believe they have been financially affected by the current economic conditions, with 29% saying it has made them more careful about what they spend, 13% saying they find it harder to make ends meet and 13% worried about losing their job.
But I am sure they are more financially savvy than they are often given credit for, and many are already taking control of their own financial future. The extent of this financial engagement is clear from the Aviva research which found that 89% have a savings account and 41% invest in a cash ISA.
In terms of short-term planning, 36% are saving to buy a house, 34% are looking to pay off their debts, and 20% are looking to pay off an existing mortgage. Spending on the items such as holidays and hobbies just don’t rate among their top financial goals, with only 13% listing funding their hobbies/interests, and just 8% mentioning saving for a holiday.
Their long-term goals are also financially-focused, with almost 50% claiming they already have a pension (workplace or personal) while 34% have a life insurance policy. Of those who don’t yet have a pension the majority are planning to take one out in the next five years.
So even though their financial situation may be a challenge, the foundation generation are not the reckless spenders they are often portrayed as. They are savvy about their finances and earnest about ensuring they start planning for their long-term future now, rather than leaving it too late or assuming that the State will pay for them.
What we do need to do is work towards ensuring that this desire translates into more people actively putting money aside for their long-term future. More work still needs to be done to emphasise the importance of planning for the long-term as early as possible. Whether this comes from parents, employers, financial advisers or product providers, it is in everyone’s interests that the foundation generation get off to a solid start.
From our point of view, in order to help raise awareness among younger workers about the importance of making the most of their hard-earned cash, Aviva has launched its Magic Money social media campaign. This shows a series of short film clips on Facebook, featuring magician Pete Hathway, who uses magic tricks with money to bring home the savings message to this generation of workers.
The idea is to get people talking. For younger workers still establishing their careers, saving for retirement seems a long way off but this is a conversation everyone should be having sooner rather than later.