Born between 1980 and 2000, today’s millennials (also known as Generation Y) range from 18 to 38 years of age. According to the Strauss-Howe generational cycle theory, members of Generation Y share traits with the young people who came of age during the Great Depression.
While the economic challenges of our time, such as the property recession in the early 1990s, the dotcom bubble of 2000 and the global crisis of 2008, haven’t been as severe as those faced eighty years ago, the uncertainty surrounding our economy does not appear to be helping this generation plan for their futures.
In this article we highlight some of the key financial problems being faced by today’s Generation Y.
With tuition fees having been introduced by the Labour government back in 1998, millennials were the first generation to pay for higher education. Whilst means-tested student loans were introduced to appease the situation, university tuition fees in England are now the highest in the world, meaning many students start their working life with an average debt of £50,000.
Add to that the cost of buying a house, buying a car, getting married and having children, millennials are accumulating large sums of debt in a relatively short space of time. That said, many millennials do not seem to be put off by these costs, assuming them to be ‘good debts’ or a part of ‘normal life’.
With almost half of all millennials living from pay day to pay day and 37% of those under 35 preferring to live for today rather than save for the future, failing to put money aside every month is a habit that many millennials have fallen into.
While this could be apportioned to the aforementioned accumulation of debt, it is also thought to be caused by many millennials not earning enough money to account for their current rate of spending. With rising inflation, high rental payments and stagnant wages, today’s generation Y is struggling to make ends meet, let alone save for the future.
In some ways linked to point 2 above, most millennials tend to have very little, if any, emergency savings. When an unforeseen financial event occurs, many are likely required to put some of their expenses on credit cards, thus pushing them further into debt. However, as stressful as these financial crises can be, they can have a positive outcome, as they will often finally spur millennials into saving to avoid a reoccurrence in the future.
We are all guilty of asking ourselves ‘where did the time go?’ and millennials are not alone in thinking that retirement is far away in the future when they are young. As we regularly advise our clients at Finura, the further in advance you start planning for retirement, the more you improve your chances of achieving the retirement you want.
By not putting money away the day they receive their first pay check, millennials have become accustomed to netting – and spending – all their monthly income. It may sound simple but, by saving from day one, millennials can get used to living off a lower monthly income at the same time as planning for their future.
For someone in their twenties or thirties, paying for insurance may seem low on the list of priorities when trying to make ends meet. But it is not just our phones and cars that needing insuring and few millennials are thought to have life, medical or critical illness insurance.
Many millennials won’t have considered that getting insurance is much easier whilst they are young and healthy. Should any medical conditions arise, treatment can be costly, and they may not get insured in later life.
With a plethora of other day-to-day financial concerns to worry about, many millennials have not thought about checking their credit score. As they accumulate debt during university and overspend on credit cards, it is easy to forget how this can impact them in later life. Low credit scores can result in higher interest rates for loans and mortgages, which can essentially add thousands of pounds in interest payments over the course of these loans.
And whilst some millennials have avoided taking out credit cards or loans to avoid amassing debt, not having a credit history can also result in them being denied a loan when they come to making an important purchase.
If you need any assistance in managing your finances, please contact a member of the team who will be happy to assist.
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