Millennials are often portrayed as wasting their earnings on soya vanilla lattes and Instagrammable holidays in exotic locations. A Barclays report found that the average 20- to 37-year-old spends more than £3,300 a year on ‘takeaways, eating out, daily coffees, socialising and buying new clothes’ — the inference being that they ought to be squirrelling the money away instead.
Yet in reality, plenty of millennials are keen savers and more sensible than their parents, perhaps because they have grown up beneath the cloud of financial insecurity. This is the generation that came into adulthood during the greatest global financial crisis since the 1930s, and it has left a mark or two. Research from Standard Life shows it is a ‘negative myth about 13- to 35-year-olds being reckless and wasteful. The findings revels a nation of young but sensible savers’. And plenty of other research agrees.
Figures from the Office for National Statistics show that half of twentysomethings have no savings at all — up from 40 per cent a decade ago. But I’d argue that it is remarkable, given student loans and high rents, that as many as 50 per cent do have cash stashed away. All of us are saving less, not just young adults. The Household Savings Ratio — the amount an average household has left after bills and spending as a percentage of income – has been falling steeply, from 14 per cent of household income in 1992 to 4 per cent last year.
Hargreaves Lansdown has produced figures which suggest an even higher level of saving among the young. They show that 66 per cent of 18- to 34-year-olds save every month, compared with just 52 per cent of those aged 35 to 54 — theoretically the prime saving years. And the younger age group is also slightly more likely to have a nest egg — 73 per cent of 18- to 34-year-olds have cash savings compared with just 71 per cent of those aged 35 to 54. Opt-out rates for auto-enrolment into pensions are also lower for those in their twenties than for those in their forties, fifties and sixties. Barely 4 per cent of 22- to 29-year-olds opt out of the government’s scheme to save for retirement, whereas for the older age groups, opt-outs have reached 14 per cent, despite them being much closer to retiring.
Look at Individual Savings Accounts (ISAs) and a similar picture emerges. In the financial year 1999/2000, when the ISA was introduced, 4.3 million people took out cash ISAs, a quarter of whom were under 34. In 2016/17, 8.1 million people took out cash ISAs, but now 30 per cent are under 34. Hargreaves Lansdown has found that more than nine in ten Junior ISAs are still open and invested a year after the account holder comes of age at 18 and gets access — which hardly suggests young people are frittering away money.
That young people are saving is partly thanks to government incentives. Money saved in Help To Buy ISAs and Lifetime ISAs receives a 25 per cent bonus courtesy of the taxpayer. Sarah Coles, personal finance analyst at Hargreaves Lansdown, says older generations find it hard to believe that young people are being responsible with money. ‘They can remember scrimping and saving for their first property and sitting on the floor while they saved up again for furniture. So it’s easy for them to look at younger people spending money on trainers and Aperol Spritz, and see that as the root cause of their problems. This overlooks the jaw-dropping rate at which house prices and rental costs have outstripped salaries. It also ignores the increasing affordability of many consumer goods. And it neglects the fact that if you’re going to be scrimping and saving for a home of your own until you’re 34, you’re going to need something to keep you going,’ she says.
Young adults are also the first generation to grow up with smartphones, which have created new ways of managing money. Digital-only banking services such as Starling and Monzo offer instant analysis of spending. Online accounts from traditional banks give information on what is going in and out of your account 24 hours a day at the click of a mouse. Cleo, a phone app billed as ‘the intelligent assistant’, has access to all your accounts — credit cards, current accounts, Paypal etc. — and analyses spending and saving, sending cheeky messages to prompt better behaviour. These products put millennials far more in control of their money than any previous generation.
The trouble is that when we get older, we forget how financially irresponsible we were in our youth — and how much fun it was. In spring 1992 I inherited about £1,000 from my nanna. I’d spent it all within a month, booking an overland trip across Africa in the summer between leaving university and starting work. I’ve never regretted it. We need to remember what it’s like to be young.