Spend, Spend, Spend, The Young do not save anymore!

Spending £200 on one day in Liverpool could sound outrageously expensive. But for Martin, a 20 years old Argentine studying in London, it’s worth it. As a fan of The Beatles he would’ve missed anything for the inescapable Liverpool Beatles’ tour, which allows himself to plunge in the universe of these iconic singers.

Travelling, socials, or dinners, young people are looking for experiences, sometimes at the expense of saving for the future. They are portrayed as less responsible than the older generation towards their approach and management of money especially because of their ‘life liver’ attitude. Well the reality is that there are concerns about saving, but most of the time they just think they find a better use of it.

“I saved two years for a car, but finally I decided that coming to London for one semester was a much better use of my money,” Martin said.  A true trend is that young people tend to think more about the present and what they can expect from it.

In front of the O2 Arena, Claudio, who came to London for the weekend to watch the Gymnastics World Cup, insists on his desire to seize opportunities: “When we’re going to have a job, responsibilities, a family, we will not have the time for those things, we want to enjoy it right now,” he said. The trip costs him £400 but “it’s worth it” he added.

So young people want to spend money, they want to live it up and enjoy experiences, but is their way to spend as different compared to the older generations? Stephen Moss for the Guardian demonstrates the difference between both generations, explaining that young people are no longer car dependents. A Study for The Economists shows that the percentage of young people without cars increase from 20% to 28% between 1998 and 2008.

The same trend is found in the housing market with only 20% of the 25-year-old homeowners against 46% two decades ago, said The Independent. However, the reason for that trend isn’t always the result of a choice.

For Claudio, 30 years old, living in his mother’s apartment is the best solution. He cumulates two jobs, but can’t save and pay for his own housing in the same time. An uncomfortable situation that can lead to social exclusion: “I don’t mind bringing girls at home, but for them, 30 years old man leaving with mom it’s repulsive.”

“I would like to buy a house but I’m really not sure I could do it in London,” said Tharshan, a 25 years old student at The Royal Veterinary College. The Business Insider UK explains the difficulty for young people to own a house, mainly because of the increase in prices.

Capture d_écran 2017-04-17 à 20.25.32

 

Average UK house price, January 2005 to November 2016 from the Business Insider.

An increase in price that severely impacts the time needed for a young person to buy a house. In 2016, the younger generation would need to save for 20 years to become a homeowner.

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An increase in price that severely impacts the time needed for a young person to buy a house. In 2016, the younger generation would need to save for 20 years to become a homeowner.

“I know I would never have enough money to take a loan and buy a house,” Claudio says, “at least if I find the perfect wife” he added, without seeming worried about his future. Many young individuals despair of owning a house one day and then don’t see the point in saving. However, it is not the only reason they can’t save. Young people have a weakness in spending.

For a branch manager of a UK bank, also father of a 16 years old girl, this attitude to spending is a response to a societal shift: “When I was young I only had a football and I bike, but because that was the only things I had access to” he said laughing. The shape of the economy has changed, giving access to a larger number of goods, and pushing to consumerism.

Capture d_écran 2017-04-17 à 20.55.12
Average young people expenses per month, in the UK. Food, social and travel are the main expenses after their rent

The main expenses of young people, instead of rent, are constituted by leisure such as food, social activities and travels. The branch manager, who remembered what his parents used to have access to and compared it to what his daughter can get, insists on the easy access to leisure.

“Now we can decide to go in New Zealand, South Africa, Thailand, Argentina, but because it’s easy, it would have never come to my parents’ mind to go in New Zealand, simply because it wasn’t as possible as now” he said.

Competitive prices for good food and unforgettable travels incite young people to spend their money, and most of the time without even counting it “I try to budget in reality, but if I want to go out, I just do it,” said Tharshan.

Even though, Tharshan doesn’t have the chance to be financially supported by his parents. He has a government loan of £16,000 for his studies, two different jobs that ensure him to live, and make him independent and responsible. Thus, he is concerned about savings but it’s not his priority: “I tried to save £200 per month but sometimes, at the end of the month, I have to spend it.”

Claudio experiences the same struggle, he works from 8:00 am to 10:00 pm, has an income between 2,200 and 2,500 euros per month, has two saving accounts and manage to save only 145 euros per month, “and most of the time I drain my second account before the end of the month,” he added.

Claudio and Tharshan both aren’t concerned about renting and still don’t manage to save properly because of their spending.

A study conducted by the IPPR shows many young individuals are in the same position as Claudio and Tharshan. “When the participants had tried to put some money aside for emergencies they found there was a strong temptation to dip into these savings and that they were hard to maintain at high levels,” the study said.

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Young people’s level of savings poll results (% of respondent). From IPPR report “Young People and Savings”

Barclays gives an exclusive access to their “Changing Shape of Savings” report. It shows that 42% of young people can’t save because they need all their income to cover their basic living costs. They are called the “Squeezed Savers” by Barclays.

For the branch manager, the attitude to spending is one reason but “it is important to look at the interest rate,” he warned.

The Bank of England have decreased the base rate of interest to 0.25%. The interest rate has never been that low, making a pension account irrelevant. “20 years ago, the interest rate was about 3 or 4%,” said Barclays. It explains why young people don’t have any interest in saving for a pension anymore. Spending makes more sense for them.

The squeezed savers are a “huge concern” Barclays said. Life expectancy is on the rise and most of them will have to save to live 30 years without income. Francis, Barclays Saving and Investments Director said: “There is a risk of UK young citizens to align their savings behaviour with their current and future income needs.”

Government pension is not enough nowadays to support the living costs of pensioners. People needs to have private savings. A concern that doesn’t seem to worry young people for now “I do worry about my future pension but I’m still a student, maybe I will care more when I’ll get a serious job,” confirmed Tharshan.

Here The story of Martin and Tharshan

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