A generally stable economy, technological advancements and low levels of unemployment – Generation Y are said to have it all. Tarnished as entitled and irresponsible, the generation of young adults is assumed by many to have a rosy future compared to the hardships encountered by preceding generations.
However, research carried out by Experian has released some troubling statistics as to the financial struggles faced by many millennials. Unlike their baby-boomer parents, millennials are discovering that getting a grasp on their personal finances is not as easy as first assumed.
With 25% of Generation Y running out of money before payday and 21% having gone into an unplanned overdraft, falling back on the purse strings of mum and dad is not an option available to all, which can result in spiralling debt and ‘head in the sand’ attitudes.
However, before even getting their hands on any money to blow, the search for full-time employment for those having graduated from university is a mine-field of low grade, minimum wage jobs that end up being the only option for some graduates, out of necessity.
With the number of students being accepted into full-time university courses in the UK rising annually, despite a hike in fees, there is a vast pool of talented young adults furiously competing for graduate schemes and career opportunities before having dreams quashed and bouncing between unpaid internships and temporary café work.
Logistically, millennials are struggling with their finances because they have nothing coming into their accounts. A concern voiced by many graduates is that they are slipping further and further into debt as employers are wanting individuals with both professional experience and academic qualifications, meaning millennials should have started working at around the age of 5, whilst juggling a full-time university course, to have any substantial chance of success.
With the premise of discussing personal finances with an expert seemingly a daunting option, or simply one that is not known to be available, the majority of young adults frequently turn to their parents as their primary source of financial advice. Given that many young people view their parents as trusted and experienced agents in the complicated world of money, and with parents not being experts, information can be misconstrued which subsequently adds little genuine benefit to the financial quandaries of the millennial generation.
Coming from an age where a property could be purchased for thousands of pounds, as opposed to hundreds of thousands, many parents and guardians still live by the motto that ‘hard work pays off’. According to Yahoo! Finance, in the 1970s it would roughly take 0.77 years to save and purchase a home, whereas data for today suggests a slog of 8.52 years to get even a toe on the property ladder with a salary of £25,000. Inevitably, times have drastically changed, and the information supplied by parents is often suggested to be stagnant and outdated when it comes to important financial decisions such as cars, property and pensions.
Young adults are under no illusion that they will have to work hard to provide for themselves in future life and upon retirement, but lack of knowledge and awareness of pensions and products available to make this process easier is an issue, with 50% of millennials having little grasp of how pensions work and limited understanding of the mystical world of mortgages. Essentially, millennials are in a position where they owe a lot and want a lot, but don’t know a lot.
This lack of knowledge surrounding pensions – both state and employer-sponsored – has created a generation of cynics, with the majority of millennials placing little confidence in any hands but their own. 53% of Generation Y believe their own personal savings will be the most essential part of income for their retirement, with only 36% mentioning employer contributions to national saving schemes, and only 31% believing the government can help.
With parents having provided millennials with a skeleton of financial advice, trust is a major challenge for financial services providers. Going up against the powerhouse of mum and dad will always be an uphill struggle for providers, but data suggests that 65% of millennials trust providers to help secure them with a plan for retirement.
In terms of the here and now, the generation are three times more likely to have been refused credit – which is not surprising when research shows that millennials are four times as likely to have defaulted on a credit account and five times more likely to have missed an agreed credit repayment. It could be said that this financial rut and subsequent plummet into varying levels of debt gives financial services providers – and millennials alike – a rocky terrain to build strong financial relationships on, with both parties not wholeheartedly trusting each other.
Despite this trust percentage being as solid as to be expected given the scepticism of Generation Y, it would be understandable that financial services providers would like to target millennials via social media platforms. It is widely accepted that social media platforms are heavily consumed by this younger generation, with many applications being part of everyday life.
However, results show that under 1% of millennials have any desire to engage with financial services providers via their social media platforms, preferring contact with these companies to be via website, in branch or via telephone. A UK millennial suggested: “this idea that they can form a relationship with customers over Twitter will just end in tears. It’s just a prime example of banks trying to appear friendly, close and pally, but they just want a professional relationship.”
The general consensus amongst Generation Y is that they would like to be the individuals to make first contact with providers and not have false relationships thrust upon them via social media profiles.
However, despite the uncertainty facing millennials, the research conducted by Experian suggested some positives. Half of millennials consider themselves to be ‘savers’ as opposed to spenders which is reflected in the fact that 23% manage to save half of their disposable income and comment that their parents or guardians have had a positive influence on their money management habits, having twice the savings of those who decided to seek little to no advice. Furthermore, with the tech generation having a plethora of apps at their finger-tips, 43% use their online banking app to keep tabs on their spending habits.
According to research conducted by the Royal Bank of Scotland in their 2015 Millennial Home Buying Survey, 31% of millennials questioned are browsing the housing market and 17% are actively seeking a property to buy. This survey collated results from 1,500 22-30 year olds who are non-homeowners which suggests that it is not certain doom for the younger generation. Interestingly, 81% of those currently residing in London would compromise location, and subsequently their current employment, if it enabled them to purchase their own property.