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Fewer than one in five (18%) 18- to 34-year-olds feel comfortable and in control of their finances, compared to more than half (56%) of those aged 65 and over, a recent NerdWallet study has found.
On top of that, 77% of 18- to 24-year-olds and 80% of 25- to 34-year-olds who responded to the 2,000-person survey told us that their financial situation has affected their mental health more compared to one year ago. This is in contrast with 24% of those aged 65 and over.
Sebrina McCullough, head of external relations at Money Wellness, an organisation providing free debt advice, says: “Under-35s are most likely to be exposed to the cost of living crisis compared to other age groups, with a greater proportion of their income going out to cover mortgage and rent, childcare, travel, and lifestyle costs. It’s not uncommon for us to see people with a deficit once all their priority bills have been paid.”
With the cost of living crisis putting pressure on their finances, some younger people have been forced to take risks to cope.
Housing costs hitting youngest hardest
Analysis by the Office for National Statistics (ONS) of the impact of the increased cost of living on adults across Great Britain found that, between September 2022 and January 2023, 25- to 34-year-olds had the highest odds of experiencing some form of ‘financial vulnerability.
A significant reason for this is rising rents and mortgage costs. Those aged between 35 and 54 account for 60% of households with a mortgage, while about two-thirds (65%) of homes in the private rented sector are occupied by someone aged under 45 years, according to the 2022 English Housing Survey.
McCullough explains: “Millennials are probably the most vulnerable to financial problems as they were more inclined to take on large mortgages when rates were low. Many of these fixed-rate mortgages will be coming to an end this year or next, and these people will find repayments rising by £5,100 per annum on average [by the end of 2024, according to research by The Resolution Foundation].”
Renters are facing similar pressures, with rents rising by more than 10% in a year to an average of £1,229 per calendar month, according to the HomeLet Rental Index for June 2023.
On the other hand, the Housing Survey found older people are more likely to own a property outright, almost two-thirds of all properties owned outright in England belong to those aged 65 or over. Meaning many over 65s are likely to be better shielded from these rising costs.
Turning to credit to cope
Food inflation, childcare, and transport are also squeezing household budgets and without a sizeable savings buffer, young people are turning to credit to cope.
A recent study from Resolution Foundation, an independent think tank, found that 18- to 24-year-olds were more likely to see their savings drop below £1,000 than older age groups. And the ONS found that 34% of 25- to 34-year-olds borrowed more than one year ago, compared to just 7% of those aged 75 and over.
But financial pressure may only be part of the story. McCullough says many younger people may feel more relaxed about borrowing than older generations.
“Millennials and Gen Z are the generations brought up only knowing and understanding low interest, low inflation, cheap debt, and readily available access to credit. As a result, they are more comfortable using credit to pay for food and bills and more open to borrowing from friends and family than previous generations.”
[Millennials are those born between 1981 and 1996, while Gen Z are younger people born between 1997 and 2012.]
Buy now, pay later (BNPL) is also proving a popular form of borrowing among younger generations.
While BNPL can be helpful if it’s used effectively, it carries the same risks as other kinds of borrowing if you miss payments and build up debt.
As well as more formal forms of credit, around 2.6 million of 18- to 34-year-olds had financial help from their parents in the past year, according to the Resolution Foundation.
But not everyone will be fortunate enough to be able to borrow from friends or family.
With limited options available, some young people are having to take more drastic measures to cope.
The Resolution Foundation found that 20% of 18- to 24-year-olds and 16% of 25- to 34-year-olds were behind on at least one priority bill between December 2022 and March 2023, more than any other age group.
The same study also showed that younger people were more likely to eat less or skip meals because of a lack of money.
Take control of your finances
Whatever your age or situation, you don’t need to cope on your own if you’re worried about money and finding it hard to afford your living expenses.
If you’re struggling to pay bills or make payments, speak to your provider as soon as possible to see if you can arrange a new payment plan that is more affordable for you.
Borrowing money may seem like a good short-term solution to your money worries, but this could make things worse and puts you at risk of building up problem debt.
Instead, it’s worth getting professional advice from a free debt charity, such as StepChange, Citizens Advice, or National Debtline.
They can help you work out a plan to stop your money worries from spiralling out of control, as well as identify any benefits or extra support that you may be entitled to.
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