Young adults are not profligate with money but are stopped from saving because of short-term necessity, according to research amongst 18 to 35-year-olds from the Pensions and Lifetime Savings Association (PLSA).
Asked what prevents them from saving, 48 per cent say the cost of living is too high and 43 per cent say their salary is too low. Just in five say their lifestyle stops them saving, less than the 30 per cent who cite the cost of their rent or mortgage.
The research found 58 per cent of 18 to 35-year-olds agree with the statement that saving products are designed for people who already have money. The survey paints a picture of a cohort of savers who want to save for the long-term, but the reality of the cost of living, low salary levels and housing costs mean it is difficult for them to save.
Some 18-35 year olds are managing to save but typically for the short term – 34 per cent are saving for a rainy day and 32 per cent say they are saving for a one-off purchase such as a holiday, car or TV.
A majority of the sample – 57 per cent – say they do not have any debt, excluding student loans, and 65 per cent of 18-35 year olds do not acquire any debt on a monthly basis.
The research shows 51 per cent of 18 to 35-year-olds get more satisfaction from saving money than spending it and 53 per cent disagree with the idea that they tend to live for today and let tomorrow look after itself.
Given an unlimited sum of money, 42 per cent would prefer to invest in property to get the best return – either buying their own home or investing in additional property. There is comparably little interest in Isas, or investing directly in the stock market. But faced with the reality of what they actually have available to save, 41 per cent opting for a savings account and 26 per cent choose a cash Isa.
A majority of young adults with an outstanding student loan – 54 per cent – say they do not consider it as a debt and only 26 per cent say student loan repayments prevent them from saving each month.
Pensions and Lifetime Savings Association chief executive Joanne Segars says: “18 to 35-year-olds are no different to many people – they want to save for a secure future but short term financial pressures get in the way. And it’s not surprising that without help this group prioritises short-term over long-term saving given the current rock-bottom interest rates and low wage increases.
“Our research suggests many 18-35 year olds shy away from the sort of investments that give better returns over the long-term, but it also suggests that where a financial decision or situation becomes a fact of life, for example student loans, this group quickly accepts it and adapts. We’ve seen this behaviour in workplace pensions with a very low opt out rate from automatic enrolment of just 7 per cent by those aged under 35.
“Those younger savers staying in their workplace pensions are smart. Automatic enrolment provides them with a hassle-free way to save for the long-term – they don’t have to think about the investment strategy, or choosing the product, or moving their money, they just have to keep saving.”