Free-spending, work-shy, tech obsessed, hedonistic and not wanting to save money.
These are some of the accusations labelled towards millennials.
But, are these claims fair?
Studies show that the millennial generation is not saving enough in their pensions. The “you only live once” attitude translating as “spend now, worry about it later.”
Millennials, aged between 18-35 (or born at the time of the last millennium), would rather spend money on experiences than possessions. They prefer skinny lattes, go backpacking and attending fitness classes, rather than save for a mortgage or put it into a pension.
With four out of ten millennials having no pension provision, these accusations towards millennials would appear correct.
However, the reality is that it’s a symptom of low paying jobs for young people, high living costs and a gloomy economic future.
End of final salary pensions
Pension schemes today, depend on how much salary people are able to afford to put in.
And, it is unlikely that these schemes will provide enough of a nest-egg for retirement, meaning that an extra private pension is needed.
Historically, savings and investments produced credible returns, in some cases paying 10%, thus making your money work for your retirement.
But, with the current Bank of England rate at 0.5% – having thousands of pounds in savings produces next to nothing in returns.
So, it’s no wonder that millennials bother to save!
To get any decent returns, they need to move their money between accounts to scrap a percentage point here and there.
High cost of living
Another point to consider is even if millennials do save, what could their savings realistically buy?
The gap between average wages and house prices only continues to grow and is improbable to reach for many first-time buyers.
For example, with an average house price of £210,402, a 10% deposit of £21,000 would be needed. If millennials saved a budget-busting £500 a month, it would take 3.5 years to save. Assuming of course they have a high enough salary to afford the mortgage payments in the first place.
As many millennials accept they will not buy a home, one in five people under 30 do not believe they will ever retire. Due to increases in life expectancy and the ageing population placing a burden on the welfare state.
Young people believe there will be nothing left for them.
Current retirees are relying on their home ownership to fund their retirement. This is made easier due to the crippling rises in house prices.
If millennials cannot rely on home ownership to fund their retirement, they believe they will never retire.
No trust in financial institutions
Millennials came of age at the height of the 2008 financial crisis.
So you can understand why they believe financial institutions are corrupt and only care for the super-rich. In turn, millennials feel banks are not trustworthy.
If, millennials do save, will their hard-earned savings in a pension fund still be there once they come to retire?
Or, will they be squandered on risky investments or to pay a banker’s bonus at a collapsed bank?
Anger at banks doesn’t stop there.
For millennials, it makes sense not save:
- interest rates are at a record low,
- savings and investments offer little growth
- houses and homes are unaffordable
- retirement pensions they will less likely see
Especially when they don’t trust the banks with their money in the first place!
Millennials do care; they cannot afford to have a pension
Millennials are not intentionally disregarding their futures, nor do they have a lax attitude to saving than their parents did. For example, 21% of all age groups say putting cash away for retirement is their top priority.
Millennials see houses, the high cost of living, low-interest rates, and increasing financial instability, as reasons why saving for their retirement is fruitless.
They are in fact, more acutely aware of their circumstances.
The millennial generation then has not made a conscious choice to abandon saving or to have physical possessions. Millennials do not need Instagram-inspired holidays or the latest Apple products.
They need mortgages, investments and pensions.
They are aware of it.
It’s just they have given up ever trying to afford them.