Squeezed generation unable to save & saddled with debts
Worrying gap between the amount young people on low incomes have in savings accounts & their perception of how much they really need
New polling commissioned from YouGov by the think tank IPPR shows a worrying gap between the amount young people on low incomes have in savings accounts and their perception of how much they really need. The polling is published today in an IPPR report on young people and savings.
IPPR analysis shows that, of the almost 6 million young people in the UK living on median incomes or below, just over 3.5 million think they will 'own their own home' but few are saving enough to achieve homeowner status. Close to 2.5 million of these young people are 'often worrying' about their ability to meet their monthly costs and 3.5 million say that even if they work hard they will 'always worry about money'.
IPPR's analysis shows that homeownership is out of reach for most young people on low incomes because of a lack of house building and an inability to save enough for a deposit. IPPR argues that with record youth unemployment, young people on low incomes are at risk of redundancy, with little savings to fall back on.
IPPR warns that there are few routes for young people on low incomes to accumulate assets of their own. IPPR says that current incentives to save, like Individual Savings Accounts (ISAs) and higher rate pension tax relief, are skewed towards people who already have assets. The cancellation of the Savings Gateway removed one possible savings incentive for people on low incomes and the abolition of the Child Trust Fund means that a saving programme that might have eased to situation for young people in the future no longer exists.
The new poll shows:
- Just over a quarter (26%) of 18-21 year olds earning less than £21,000 a year say they have no debt at all (including student loans, credit cards, store cards or overdrafts). But less than one in five 22-29 year olds say they are debt free.
- More than four out of ten (42%) 18-21 year olds and almost half (49%) of 22-29 year olds earning less than £21,000 a year say they have combined debt of £5,000 or more (at least a quarter of their pre-tax annual income).
- When asked if they make sure they always have "money saved for a rainy day", almost two thirds (63%) of 18-21 year olds earning less than £21,000 a year say they doHalf of 22-29 year olds earning less than £21,000 also agree that they always have "money saved for a rainy day".
- Almost one in five (19%) of 18-21 year olds earning less than £21,000 a year have no savings at all. The number rises to almost a third (30%) for 22-29 year olds earning less than £21,000.
- Almost two thirds (62%) of 16-29 year olds earning less than £21,000 a year say they believe they will own their own home in the future. But just one in five young people on low incomes have £5,000 or more in the bank: 22% of 18-21 year olds earning less than £21,000 and 19% of 22-29 year olds.
- When asked how long they could make ends meet if they lost their job, more than a quarter (27%) of 16-29 year olds earning less than £21,000 a year say 'more than one month but less than three months'. But almost one in five (17%) say they could make ends meet for less than a month.
IPPR Chief Economist, Tony Dolphin, said:
"This polling shows a huge gap between the extent to which young people on low incomes think they have enough saved for a rainy day and the reality of what they really have in their bank accounts. Most financial advisers would recommend that people put aside the equivalent of three months take-home pay for an emergency. But our poll suggests that very few young people have the reserves they would need if they were made redundant. With over 1 million young people already unemployed and the Office for Budgetary Responsibility predicting that unemployment will continue to rise in 2012, these young people without savings are particularly vulnerable.
"The Government should explore ways of encouraging young people on low incomes to build up savings. If we want a savings culture, we will need new ways of spreading wealth and helping young people build up their assets."
Notes to Editors:
All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 1504 adults aged 16 to 29. Fieldwork was undertaken between 15th - 22nd November 2011. The survey was carried out online.
IPPR's new report - 'Young people and savings' - is available from the IPPR press office under embargo and will be available to download from http://www.ippr.org/publications/55/8650/young-people-and-savings-polling-results
IPPR's work is informed by academic evidence of the 'asset effect':
Richard Darlington: 07525 481 602 / [email protected]
Tim Finch: 07595 920 899 / [email protected]