FEATURE INSIGHT
The financially forgotten generation
James Herbert, founder of Hastee Pay, explores the financial challenges faced by the millennial generation
I n a lot of ways, millennials have it easy. A millennial will never know the pain of rewinding a cassette tape, having to wait for a payslip to be cashed or trying to write a research report without the aid of Google. However, financially millennials are seemingly at a disadvantage. From the moment a millennial leaves education, they’re faced with astronomical debt, a housing market which they’ve been priced out of, and the prospect of working more years than any generation ever has. This is seemingly confirmed by a 2018 from Resolution Foundation which revealed that UK millennials are the second worst-hit financially in the developed world (https:// bit.ly/2K9KkGa). unearthed that while 69% of millennials rated their financial knowledge highly, only 24% could demonstrate basic financial literacy (https://bit.ly/2GueYbo). Through a lack of financial awareness, could it be that this generation is truly struggling to survive between Instagram posts of smashed avocado on toast? Or is it more accurate to suggest that the demands of modern society are forcing them to over-stretch themselves and rely too heavily on parents, credit cards and overdrafts to fund their lifestyles without any real regard for future financial stability? On the one hand, they have been lumbered with a higher cost of living as average price inflation for the UK has recently grown to its highest level since April 2012. On the other hand, highly targeted online ads, social media influencers plugging products from ’luxury’ brands and an endless influx of ‘must-have’ subscription services are just a few of the forces encouraging them to spend beyond their means. There are various factors contributing Another study from the National Endowment for Financial Education
now reached a record high of £100bn, is forecast to reach £160bn by 2022. A debt- free future seems increasingly unlikely for younger generations considering university tuition fees are now at £9,000 per year. According to the Institute for Fiscal Studies think-tank, an estimated 83% of graduates will not fully clear their debt within the three decades in which they are expected to complete repayment (https:// bit.ly/2KcE2sQ). Further research from First Direct reveals that 43% percent of millennials are planning on using money inherited from their parents to pay off their debts (https://bit.ly/2IdwOQh). ...debt-free future seems increasingly unlikely for younger generations... The continuing housing crisis means one in four millennials are yet to fly the nest. While it’s easy to assume this generation has become comfortable living off their elders, a study from the Resolution Foundation found that despite having to spend three times more of their income on housing than their grandparents, they have to make do with a poorer standard of accommodation. When it comes to employment opportunities, millennials are often accused of being job hoppers. Gallup’s 2016 study, Millennials: The job-hopping generation (https://bit.ly/2JZY2jd), does indeed reveal that millennials are the most likely generation today to switch jobs. Yet, the report suggests that many millennials would rather not have to continually switch jobs; they do so because employers don’t give them compelling reasons to stay.
The report states that “while millennials can come across as wanting more and more, the reality is that they just want a job that feels worthwhile – and they will keep looking until they find it.” Hardly surprising considering less than half of UK graduates are in jobs that actually require a degree (https://ind.pn/2Kat0B2). This generation are facing unique financial challenges that differ significantly from those their parents encountered. Clearly, younger generations would benefit from a greater education around their finances. Educators should review their approach based on the challenges that these generations are facing, and employers should do their part too. Employers should also consider taking steps to increase financial wellbeing in the workforce because they have a responsibility to ensure their financially vulnerable workers are given a fair chance, just like the generations before them. From providing free financial guidance to reviewing whether payment processes really fit in with modern financial demands, employers must shoulder some responsibility. In doing so, they could even benefit from gains in recruitment, retention and productivity through more financially healthy, motivated and confident employees. It’s evident that the world has changed when it comes to managing personal finances. Today’s younger generations have been thrust into coping in adverse financial conditions and they’re displaying worrying signs of financial illiteracy. They are being forced to adapt to new financial struggles with no real guidance on how or where to start. Responsibility should not just fall on the individual, family unit or the government. Employers will need to shoulder some of this responsibility if millennials are not to be forgotten and given a fair deal. n
to the financial struggles of younger generations. Student debt, which has
| Professional in Payroll, Pensions and Reward | July - August 2018 | Issue 42 38
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