A study from the Youth Futures Foundation has shown that young people spend, on average, double on essentials like rent or bills than people aged over 51. This could explain why, according to a survey of 2,000 UK adults by Wealth at work - a leading financial wellbeing and retirement specialist - 50% of 18 to 34 year olds have reduced or stopped any regular savings. This is compared to 42% of all UK adults and 32% of those aged 55 and over.
Jonathan Watts-Lay, Director of Wealth at work, commented:
“It’s very concerning that young people are having to reduce or completely stop their saving in an attempt to free up money to pay for ever increasing bills. Whilst it is completely understandable, it is also important to recognise that stopping saving now could have a dramatic impact on their future, and something they regret later in life. It is important to still save what they can.”
The research did show that 32% of working 18-34 year olds know they should be saving more for their retirement, as only 16% believe their savings are on track for a comfortable retirement. However, 21% have no idea how much their pension is worth and 24% have no idea how much they will need to have for a comfortable retirement, with only 25% knowing they can save more into their workplace pension than their default contribution rate of 5% of salary (with their employer contributing an additional 3%).
Adam Burn, Principal at Aon, commented:
“As young adults look to build their career and consider how to address their immediate issues concerning housing (rental costs, saving for house purchase, etc), they would greatly benefit from financial education to help them greater understand the options and choices available to them.”
While Jonathan Watts-Lay stated:
”Saving may not be something many employees are thinking about in their 20s, it is really important that they understand the difference that saving more early on can make, compared to starting in their 30s or 40s, especially if their employer will match extra pension contributions.”
He continued:
“It also may be better for an employee to reduce how much they save to what they can still afford rather than stopping it completely. Saving money is a habit, and once it is stopped, it is very difficult to start up again.”
