How money worries are changing for millennials!

Money saving tips for millennials from Loans 2 Go…

Everyone, no matter how young or old, has some kind of worry about money. That has always been the case and probably always will be. No matter how much or little money you have, there seems to be something to worry about: particularly in these turbulent political and economic times.

But it is becoming increasingly clear that money worries do differ between generations. And the generation known as millennials seem to have a particular set of money worries that do not affect the older generation.

Millennials are the generation born between 1981 and 1996; so currently aged around 23-39. The name “millennial” refers to the fact that this group of people were the first to reach adulthood after the Year 2000 – the Millennium.

So what financial problems are unique to this group of people that did not affect earlier generations?

There are five particular areas where they can be disadvantaged:

House deposits

To buy a home in 2020 you will usually need a deposit of at least 5% of the value of the property to be able to get a mortgage. Some mortgage lenders require more. With the average value of a house in the UK (as of October 2019) at £232,944, this means that a minimum deposit of almost £12000 will be needed before a purchase can be considered. With the difficulties in saving money (see below) this size of deposit could take a long time to accumulate – and in the meantime property prices are likely to rise.

Take a look at our recent article How to get on the property ladder without a huge deposit for advice about the kind of help available to purchase your first home.

High rents

Unfortunately if you are not in a position to buy a home, then the next best option is to rent. But rents can be incredibly high, particularly in London. This means that you are spending all your available money on rent and cannot afford to save: it ends up being a vicious circle.

In December 2019 the average monthly rent in the UK was £953, and average rent in London £1,630 a month. For many people this leaves little spare money for anything else.

So what can you do to live more cheaply? Particularly if you are trying to save for a home of your own?

One is to be determined to sacrifice the quality / space / privacy of your accommodation in order to save money. For example, how about temporarily moving back in with parents (or other relatives), going into a flat or house share with a larger number of people, or putting up with a small bedsit for a while. All of these could be cheaper options than paying a lot of rent for something bigger and better.

It’s also worth checking whether you may be eligible for council accommodation. Rules can vary from council to council so the first step is to find out your local council by entering your postcode here.

Also consider looking into a couple of lesser known low-rent housing options:

• Intermediate Rent Scheme

This scheme offers you the opportunity to rent a home at less than the market rate: usually around 20% lower than the private market. There are different intermediate rent schemes in different areas. To find out what is available in your area, the best thing is to do a Google search: for example (for London properties) “intermediate rent London”.

• Property Guardian

Becoming a property guardian could enable you to live in short-term cheap accommodation in return for keeping an eye on it and preventing squatters. The properties concerned are usually either unoccupied commercial buildings (eg offices, pubs, police stations) or buildings of historic interest. Property guardians usually pay a licence fee instead of rent and this is well below market rental prices. But the downside is that if the accommodation is going to be reused you may need to leave at fairly short notice. Check out local availability by doing a Google search: for example (for London properties) “property guardian London”.

Student loans

Student loans were introduced in the UK in 1998, again just hitting the millennial generation. The loans have to be repaid once the individual earns over a certain amount, and the size of the monthly repayments depend on how much they earn. But many ex-students find that repaying their student loan can really drag on, and make a dent in their finances for some considerable time. A typical student loan can reach as much £35,000 – £40,000 of student loan, and it’s estimated that over 70% of graduates won’t have repaid their full loan back after 30 years (after which time it is written off).

However, the interest rate on student loans is low (2.4% pre-1998, 1.75% post-1998) so the best thing to do may be just to keep on paying it off bit by bit rather than try to repay it off more quickly, as long as you then put to good use the money that you would have used to repay it.

Difficulty saving money

The combination of trying to save for a deposit, high rents, and student loan repayments are making it extremely difficult for millennials to start building up regular savings. This means that there is no fat in the system either for emergencies or to purchase major items; which then leads to the risk of falling further into debt.

So it’s important to start saving money as soon as possible, even if it is very small “baby steps”. Check out our recent article Want to save money but don’t know how?.

It is also particularly important to save money for retirement even though that now seems light years away. The best way to do this is described very nicely by the Policy Director of Royal London Insurance, Steve Webb, as SUM:

• Start as quickly as you can;
• Up your contributions when you get a pay-rise;
• Maximise what your employer will give you by putting more in.

It is not easy to save, but the sooner you start – even the tiniest amount – the better.

Parental codependency

We mentioned earlier the fact that one option for many younger people who want to save money is to move back in temporarily with their parents. According to the ONS (Office for National Statistics), at the end of 2019,  3.5 million young people aged 20-34 are living with their parents. This is a 46% increase over the last decade, up from 2.4 million in 1999.

Whilst this could be a good temporary solution to help save money, it is not the ideal long-term living arrangement for many people. It is further complicated by increasing numbers of millennials having to care for aging parents. Because many people now tend to have children later than in previous generations, and are living for longer, the age of carers is beginning to vary widely. It’s now estimated that around 25% of unpaid carers in the UK are in their twenties and thirties. 

As well as not having their own financial security, these millennial carers are likely to be time poor because they are juggling demanding employment simultaneously with their caring duties. This can lead to further financial vulnerability both for the millennial and the person for whom they are caring.

If you are in the situation of providing unpaid care for a relative and are running into financial or practical difficulties because of this, then it is time to look around for help that may be available. A good starting point is the Citizens Advice Bureau’s web page on Carers: help and support.

So these are five of the major financial worries facing millennials today. We hope that we have managed to point you in the right direction for help and support if there are any that apply to you. Remember to check back here soon for more financial and lifestyle tips from Loans 2 Go.