Young people and savings: A route to improved financial resilience

The report draws on polling of 1,504 young people, workshops with 54 young people, interviews with 10 expert stakeholders, and a literature review.

Young people today face a very uncertain future as a result of the double-dip recession, government spending cuts and structural problems such as the high cost of housing. The current generation of young people in the UK may be the first since the second world war to fare worse economically than their parents.

This report discusses some of the challenges young people face and shows that those on low incomes, in insecure employment or not in work are highly vulnerable to financial shocks and lack the safety net that would help them deal with financial emergencies such as sudden unemployment. The report argues for measures to improve young people's financial resilience, including:

• Asset-based welfare policies - the Child Trust Fund, which was scrapped by the Coalition in 2011, was seeded by the government and provided a store of assets to every child in the country. It only cost the government £500 million each year. Take-up of the Junior ISA, which replaced it, has been low in comparison. The Junior ISA has been most popular with middle- to high-income families. The government should seed the Junior ISAs with cash, at least for children from low-income families. In the longer-term and more generally, it should try to build public support for asset-based welfare.
• New kinds of savings accounts - there is appetite for a new type of savings account with both people on lower incomes and financial service providers. Such a 'life-time' savings account would offer easy access, particularly when making deposits (for example at supermarket tills); a 'kite-mark' on the account as a government guarantee and too avoid the need for excessive paperwork when opening the account; and partial matching of savings by the government. Young people in particular have been receptive to the idea of these features in an account.
• Changing the culture around saving - useful financial education should be included within the national curriculum to provide young people with a working knowledge of types of financial products, the benefits of saving, and budgeting skills. Currently the provision of financial education is patchy, and courses are often not as effective as they could be. Additionally, the Money Advice Service should spearhead a campaign to encourage people to save more, in opposition to the predominant culture of spending.