First Published: 14/04/2016
Millennials are often thought to be spenders rather than savers, but it seems that this assumption could be wrong: research from Zopa has found that those aged 18-35 actually save more than their older counterparts, with it highlighting a clear difference in attitude and spending habits.
The figures show that so-called millennials (18-35 year-olds) save an average of 10.9% of their monthly post-tax income, while Gen Xers (36-54 year-olds) save just 8.8%. This shows that, contrary to popular belief, the younger generation is actually more financially responsible than people tend to give them credit for, a fact highlighted by the finding that they wish they were able to save more, with closer to 17% of their monthly income being the ideal figure.
Millennials are also savvier when it comes to their spending habits, and are prepared to spend far less on everyday essentials than their parents generation. For example, millennials would be willing to spend £2.68 on a cup of coffee while their older counterparts would splash out £3.07, and its a similar story in terms of a pint of beer (£3.87 vs. £4.74), a cinema ticket (£7.83 vs. £8.30) and even a week-long holiday in Europe (£416 vs. £490).
However, just because theyre not willing to spend over the odds, it doesnt mean that millennials are debt-free. In fact, theyre more likely to view debt as a normal part of life, with 46% expecting to manage with some form of long-term debt. Their view of manageable personal debt is also higher than that of the older generation, coming in at an average of £5,892 compared with £4,251, a difference of 39%.
Millennials have been characterised in some quarters as spendthrifts, but this research shows that most young people have a very responsible and positive attitude towards their finances, in most cases beating the odds heavily stacked against them, said Giles Andrews of Zopa. In recent years, low interest rates have discouraged millennials from investing in their future, so its vital that young people are now given innovative ways to grow their money by making saving and investing worth their while.
Arguably, one way to encourage this has been the announcement of the Lifetime ISA, a savings vehicle that will allow those aged 18-40 to save for their pension or first home. Indeed, 45% of millennials surveyed said that this new ISA would make them more inclined to put money away, and they have a similar feeling towards the Innovative Finance ISA.
This arrangement allows investments made through peer-to-peer lending sites to come within your tax-free ISA allowance, and it gives investors the chance so secure far higher returns than with a traditional cash ISA. Given that 61% of millennials said theyd be more likely to save or invest if interest rates were higher, this could prove to be a great driver, and could mean that millennials save even more in the future.