Half of young adults don’t have a regular savings plan
Today’s 20-somethings are less likely to have any savings than a decade ago. But new technology is coming to the rescue and can help to build new habits.
According to recent figures from the Office for National Statistics, between 2010 and 2014 the number of 22- to 29-year-olds with nothing in savings or in ISAs increased to 53%.
Ten years ago, 41% of the same age group had no savings.
Why aren’t young adults saving?
They’re paying out in rent instead.
In 1980 if you were renting privately you’d be paying 10% of your income to your landlord (15% if you lived in London). Now, private renters are spending more than 30% of their income on rent, according to BBC research.
They also have more uncertain employment – with more young people working in a series of contract jobs rather than as salaried staff.
It’s also argued that ex-students have been discouraged from saving and trained to be “comfortable” with debt, with the average student owing more than £50,000 in 2017.
It’s easy for young people to feel that they will never be able to own a home, never be able to afford all the things they’re targeted by advertising, and will never being able to “retire” comfortably, as their parents or grandparents did. Unless they magically become rich-and-famous.
But the tax advantages of saving in a pension fund are “truly compelling” says Hamish McRae, associate editor of The Independent. “Particularly when the employer matches contributions, and that wonderful thing called compound interest enables a modest pot of money to be built into a sizable one if you wait long enough.”
Technology to the rescue
New smartphone apps are being developed all the time, which help us understand our spending habits, set savings goals and put money aside.
The Chip app connects to your online banking, analyses your spending and every few days transfers a small but affordable amount to a savings account.
Squirrel works by squirreling your money away in a separate account to start with, and then releasing it gradually back into your current account in weekly amounts, with enough set aside to pay your bills.
Money Dashboard connects all your bank and credit accounts, and all spending is displayed on the dashboard, so you can see where your money goes.
There are more apps available – just be aware that some of them have charges, and check what data they will be collecting from you.
More information on latest Savings Accounts