Millennials, those aged 25-34 years, are the least financially resilient demographic in the UK, according to new research carried out by YouGov, on behalf of insurer LV=.
The research, which polled over 9,000 consumers, found 40 per cent of 25-34 year olds aren’t confident in their ability to handle their own personal finances, while more than half don’t have the recommended minimum level of ‘rainy day’ money for emergencies. Ideally an emergency fund should aim to have three months' salary in cash, which is something that the Money Advice Service endorses, among others.
Not only did 55 per cent of millennials fall short of this, it was found that a third of the demographic did not have enough savings to cover just one month of outgoings.
The figures also make even bleaker reading for millennials who rent, which roughly half do. Two out of three millennials who rent don’t have enough savings to survive for three months without income, while nearly half could only cope for one month without income, and in some cases even less.
Renters in the age group also have significantly higher levels of debt, compared to the national average. Half reported themselves as having some form of unsecured debt, while 20 per cent said they owe more than £5000. In addition, over 20 per cent were found to be in their authorised overdraft.
Members of the 25-34-year-old age cohort are primarily being squeezed by two factors: growing rental and property prices and sluggish wage growth.
While average rent in London has started to edge down this year, the average millennial, according to the Landbay Rental Index, spends around a third of their monthly salary renting. At the same time, millennials have been particularly hard hit by the past decade’s wage stagnation. According to a report by the Resolution Foundation, a ‘typical millennial’ working throughout their 20s has earned £8,000 less than the typical member of the previous generation.
The problem of financial precarity among millennials is likely to persist. While many millennials don’t have the savings to cover themselves for three months out of work, even less seem likely to be able to cover their cost of living after retirement.
A report last month by the International Longevity Centre highlight the uphill and unrealistic task millennials face to enjoy a comfortable retirement. The report stated that millennials need to tuck away 18 per cent of their annual income to enjoy an ‘adequate income’ at retirement, while 20 per cent will put millennials on par with the baby boomer generation.
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