A recent study has concluded what we may have already suspected, that half of all young adults have no savings. The figures were based on U.K. data from the Wealth and Assets Survey, a large-scale household survey which is used to measure changes in incomes, debt, and asset wealth.
Young Americans are estimated to have more in savings, according to Bank of America’s “Better Money Habits” report, but, still, most millennials, regardless of where they live still worry about money. Some of the people surveyed spoke out to share their experiences.
Metro recently put out a very thought-provoking article involving the relationship that young people have with money. Many of the points were pretty spot on and they interviewed young adults to get a feel for how confident or insecure they feel when it comes to money.
Most Young People Have No Savings
The general consensus is that most young people have absolutely no savings and that they owe a large amount of money to credit card companies. While the women interviewed lived in the U.K. (their names were changed for the purpose of the article), their relationship with money is strikingly similar to many young adults living in the U.S.
According to the Office for National Statistics (ONS), data shows that 53 percent of young people between the ages of 22 and 29 have no savings at all. Most young people are struggling to save money due to high rent and unstable work and this causes them to have lower self-esteem. The data from 10 years ago showed that 41 percent of that same age group had no savings.
Decline In Savings
An increase in 12 percent of people having no savings is a big problem because it shows that this generation is in trouble. Many young people can’t even imaging owning a home one day. That reality seems almost unattainable after young adults have paid their rent, bills, and other expenses.
The Harsh Reality
Of the young people ONS surveyed that do have savings, 4-in-10 of those people have less than 1,000 pounds saved. Rachel, 24, is a freelance journalist who makes around 120 pounds a day (over 31,000 pounds per year), and she has just 300 pounds in a savings account. Her savings is going to be deposited towards a rented flat and it will be the first time ever that Rachel saved anything.
She says that she’ll need just over 1,000 pounds before she can move out. To be able to save that money, Rachel has stayed with her grandparents for a couple of weeks, as most of her money from her salary before that went on rent. Now, she’s able to put around 100 pounds a week in a savings account and any money she makes from freelance gigs will also go into savings.
Huge Debts With High Interest
Rachel is one of the many young adults who has an uncomfortable relationship with money. When Metro asked her about her history and how she came to be in the place she’s in today, Rachel offered an explanation that sounds very familiar to what many people deal with. “It’s probably a mixture of factors, from not having much of it when I was younger to racking up huge debts which now need to be paid off (with the high interest that comes with it),” she explained.
Annual Interest Rates
It’s estimated that the average interest rate on a credit card is around 15-25 percent. The annual interest will depend on your credit score, but oftentimes, once many young people get into debt, their APR soars. When it feels like you’re constantly paying off interest and not your actual debt, it can be tough to pay it down. Rachel felt like she needed to feel more in control, as she doesn’t earn a bad salary, yet still, she was constantly chasing her own tail.
While how she feels is all too common, Rachel explained that many personal circumstances led her to be in the position she’s in now. After her flat burned down this year and last year she had to move out after a toxic relationship, she once again was set back and had to borrow money without a financial safety net. “One day I’ll get there, once the debts are paid off, I just need to pray nothing bad happens to me in the next week [so] I can save.”
Another woman named Beth said she’s her manic spending is a product of her bipolar disorder. It’s ultimately pushed her into debt and made it harder for her to save money. Beth earns around 35,000 pounds per year but she always feels shamed when it comes to savings. She admits that she’s starting to save now, but that it can be taken away at any point.
Beth feels a sense of shame around struggling with money. “I feel a pressure to save money more than ever now because I feel like it has become the new normal to brag about buying houses and deposits,” she says. While having a nice cushion of money is a good feeling attributed to adulthood and responsibility, if you don’t have enough in your savings, you can feel like a failure.
Lack of Conversation
“The lack of open conversation around money means we compare ourselves to an often unrealistic ideal,” Metro explains, and they’re pretty spot on. Another woman, Samantha, 25, has tried over and over again, but she can’t seem to get into a stable routine of spending and saving. The end result is she is constantly stressed, which pours into other areas of her life, causing them to suffer.
Taking Money From Savings
Samantha says she earns a decent amount for her age, which is why she feels ashamed that she only has less than 600 pounds in her bank account. “It’s frustrating. I’ll go through periods of time when I have thousands of savings and I feel like I’m on the right track, then I’ll end up overdrawn on my current account and have to keep borrowing money from my savings to get through the month.”
Over the last few months, Samantha has been spending so much that her savings have been depleted entirely. She admits that she’s worried because if she were to lose her job, she wouldn’t be able to pay her rent. Additionally, if there’s any surprise expense, she wouldn’t be able to pay that either. It’s a huge burden for her to feel this way.
The Emotional Side Of Spending
“Each month I’m ambitious with my savings and transfer 500 pounds to my account the second I’m paid, but a few weeks in I’m overdrawn again. I don’t know how to stop. … A lack of comfort around money holds young people back from saving, causing rash decisions and panic spending because they were never taught how to manage their money,” the website wrote.
Spending to Cope
Amy, 29, got herself into debt when her dad passed away. She bought things to cope with the pain since she was in a really bad place. Thinking that buying things would help, Amy soon learned that it didn’t, which didn’t surprise her. “I’d bought lots of lovely things, not just for myself because if I bought nice things for my family it’d take their sadness away a bit too – but obviously none of it helped,” Amy said.
Open Conversations About Savings
Amy is currently saving money because she is working her way out of debt and looking forward to reaching its end. “If I didn’t have the debt, I’d be about 600 pounds up a month in savings.” Amy adds that she doesn’t feel comfortable at all with money and she wishes people would talk more openly about saving.
“Yes, there are plenty of things we should just know and of course we are all responsible ourselves for these situations, but I feel budgeting should be something we talk about with our kids, as well as the realistic costs of living and making a life for ourselves,” she says. “I feel embarrassed about money and yes it does cause anxiety.” Amy says she cannot wait until she’s debt free and she has a much healthier relationship with money.
The Stress of Getting Into Debt
Then there’s Emma, 24, who works as a senior account executive and makes 27,000 pounds a year. While she struggled with money in the past, she’s finally starting to feel confident in her ability to save. Just last year, she bought a flat and she plans to save 350 pounds a month once she’s paid off outstanding debt on her credit card. “Normally I set up a direct debit to come out the day after payday and try and forget about it after that. I’m usually pretty good at saving,” Emma says.
More Open Conversations
Emma concluded: “[Money] used to be all I thought/worried about but I’ve trained myself to check my balance regularly, plan my spending, budget, learn about ‘scary’ financial products like pensions and investments and I feel a lot more confident now.”