Being young should imply a carefree enjoyment of life; unfortunately, the financial realities faced by Millennials and Gen Z make this nearly impossible. Younger individuals are constrained by extremely tight budgets and are falling short in multiple areas.
A significant part of their challenges stems from the high cost of housing.
As they embark on adult life, many youth enter the workforce with lower salaries. This has been a consistent scenario across generations, but today’s youth must extend limited incomes to cover soaring rental prices. Consequently, they end up with very little left over at the month’s end.
According to the Hargreaves Lansdown Savings & Resilience Barometer, adults in Gen Z (ages 18-29) and Millennials (ages 30-45) have an average of £171 remaining after managing their expenses — in stark contrast to £277 for Gen X (ages 46-60).
This financial strain makes it incredibly challenging to save for their first home. For those who must continue renting, the situation is dire; they are left with an average of just £77 at the end of each month. Furthermore, only 28% of them have adequate life insurance, 17% are on track for retirement savings, and 46% possess sufficient savings.
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Even once they manage to purchase property, the challenges persist. They typically buy their first home significantly later than earlier generations, usually around the age of 34. By this stage, many will find themselves with one child nearing school age and another in the costly childcare phase.
The burden of rising property prices and mortgage rates only compounds their issues. About 21% of adult Gen Z and Millennials who are homeowners express concern regarding their debts, with average monthly repayments reaching £289, compared to 16% and £224 among Gen X.
Overall, it appears these younger demographics are struggling in various financial aspects, and some gaps are particularly concerning. Only 31% have sufficient life insurance, whereas 49% of Gen X do. This is critical for those who are likely to be parents, as a sudden loss could lead to significant challenges for those left behind.
The long-term outlook is equally alarming; only one-third of Gen Z and Millennials (33%) are on track to achieve a moderate retirement income.
You might feel as though there’s little you can do about this situation, as you can’t demand higher pay or magically decrease property costs. However, there are still some options available.
For life insurance, it’s wise to explore what your employer offers. Some companies provide death-in-service benefits that offer substantial protection, while others may allow you to enhance this coverage at a low additional cost, so it’s worth inquiring.
