14 November 2018
- Gen X most ‘squeezed’ generation, but generous millennials could follow suit
- 78% of millennials plan to financially support their children in the future once they leave home but a fifth (21%) worry they will have to work longer to do so
- Over a third (36%) of millennials have already provided financial support to their parents
Millennials are set to redefine how wealth is shared between generations, according to new research from the Brewin Dolphin Family Wealth Report, which provides insight into the financial opportunities for people to make the most of their money.
Contrary to expectation, it is not millennials (aged 18-34) who appear to be under the greatest financial strain, with 44% saying they are ‘comfortable’ financially. In fact, the research shows they are trying to do the right thing. Three quarters (73%) are putting money into savings and as a generation they are saving the highest proportion of their income (14%).
But while many millennials save hard, the cost of assets – especially property – means that no matter how hard they save many won’t be able to establish the lives they want without assistance. Some have given up on saving – 19% of 18 to 34 year olds feel that major life goals, such as home ownership, seem so unachievable that it has discouraged them from saving (compared with 7% overall in the survey). Over one in ten (14%) also feel uninformed about the amount of money they should be putting away.
While two-fifths (44%) of UK adults consider themselves financially ‘comfortable’, the squeezed middle are at their peak earnings and at their peak outgoings, with some supporting both children and their own parents. This has resulted in over a third (37%) of Gen X (aged 35-54) ‘making ends meet’ and a fifth (19%) admitting to ‘struggling’. Out of those aged 35-54 who are struggling, 70% of them worry about money all the time and a third (33%) sometimes go without to provide for the rest of the family.
Liz Alley, Divisional Director, Financial Planning, Brewin Dolphin continues: “There needs to be a shift in the public discussion from simply insisting people save more, to making them feel more inspired, informed and encouraged to help them get their hard-earned savings working harder. It’s very easy for life to get in the way but having clear saving goals will help to ensure that the longer-term priorities remain front of mind to help reduce future money worries.”
Millennials are stepping in to provide financial support to other generations. Over a third have already supported their parents financially (36%), double the average, and up from 23% in 2016. Two-fifths (39%) of them say they would also financially support their parents in later life – significantly higher than both Gen X and Baby Boomers (aged 55+) at 15% and 2% respectively.
Looking further to the future, only a very small number of millennials (9%) believe that their children should have to support themselves financially when they leave home. Over three quarters (78%) of millennials plan to financially support their children in the future when they leave home. More than two-fifths (41%) say that in addition to helping with university costs for their children, they intend to also support with day-to-day living costs such as food (33%), clothing (26%) and phone bills (20%). To compare, less than a third (32%) of Gen X would help with university fees for their children and even fewer would with food shopping (22%), clothing (12%) or phone bills (12%).
Aware that providing this level of financial support to both their parents and their children will have consequences, more than a fifth (21%) of those aged 18-34 are already worried they will need to work longer and that they won’t have enough money for their own retirement (also 21%). Especially considering that nearly two-thirds (63%) of them already admit they are saving too little to have a comfortable standard of living in the future.
Millennials therefore expect help in return, with three-quarters (75%) saying that they intend to rely on their own children for financial support in the future.
Dr Eliza Filby, Generations expert and historian of contemporary values adds: “Millennials have been more financially dependent on their parents than any other previous generation and they recognise that they will have to reciprocate this as their parents age and they themselves become more financially secure. They too want to offer the same opportunities and support to their children that their parents gave to them. This attitude towards financial inter-generational dependence is very different behaviour we have seen from previous generations for two very important reasons; children are dependants for much longer and the elderly are living much longer. The family unit are more financially interdependent and emotionally tied than at any other time since before the Second World War”.
Liz Alley, Divisional Director, Financial Planning, Brewin Dolphin said: “Millennials know life is tough and that financial independence isn’t as easy as it once was, so they are already thinking about supporting their parents in retirement and their kids well into their twenties. However, planning to rely on the next generation in return is not a reliable or substantial finance plan and it’s important that this generation take stock of their finances now to avoid becoming the next ‘Sandwich Generation’.”
Avoiding the squeeze
Brewin Dolphin outlines ways in which millennials can prepare themselves financially so they can support family members in the future and avoid becoming the next ‘squeezed’ generation while doing so.
- Make a plan: This may sound like an obvious strategy, however previous research from Brewin Dolphin has shown that over half of the UK population plan their lives only days or weeks ahead. With big plans for their own financial futures as well as for helping their families, it is worth taking the time to work out what will be needed to achieve this and go from there to create a plan to achieve it.
- Take advantage of tax breaks and pension benefits: ISAs are one of the best-known options for tax free gains from your savings, and they should be one of the first options for people with short-term cash savings and longer-term stocks and shares investments. The annual pension allowance of £40,000, the amount of money that each person can pay into their pension on a yearly basis while still receiving tax relief, can also be used separately for retirement savings. If you pay money into a workplace pension scheme, there is also the opportunity to take advantage of matched contributions. This is where your employer contributes a higher proportion of your wages into your pension pot if you also opt to put away more of your income for your retirement. If you can afford to do so, signing up for higher employer matched contributions means you will also receive more tax relief from the government.
- Increase your savings rate as your wage rises: The research revealed, as a proportion of their monthly income, millennials are saving the most of all the generations (13.8%). They are also at a time in their lives when their earnings will likely be increasing as they get promotions or move jobs. By upping, or even maintaining the rate of your savings, as your salary goes up will mean the money you are putting away each month increases too. Over time this can have a substantial impact on the size of your savings pot. For example, if a 20-year-old starts an ISA, contributing £200 per month; increasing to £400 per month aged 30 and then to £600 aged 40 – at age 65 they would have an ISA worth £587,000.
- Create different pots for different goals: As above, making use of all the tax-free options available for your savings should be a number one consideration, and creating a different pot for different goals can help in your planning, for example ensuring your retirement pot is making the most of all the tax and employer benefits and your ISA allowance for other savings. If planning to help children in the future, it is worth bearing in mind that you can open a Junior ISA in their name, meaning that you don’t need to use your own tax-free allowance to help fund your children’s future. If a family invested £100 per month over the next 15 years into a Junior ISA they could amass a savings pot of £24,600 over this time.
PRESS INFORMATION
For further information, please contact:
Richard Janes richard.janes@brewin.co.uk / Tel. +44 (0) 20 3201 3343
Sian Robertson: Sian.Robertson@brewin.co.uk / Tel: (0) 20 3201 3026
Payal Nair payal.nair@brewin.co.uk / Tel: +44 (0) 20 3201 3342
FTI Consulting: Brewindolphin.sc@fticonsulting.com / Tel: (0)20 33195642
NOTES TO EDITORS
Research conducted by Opinium Research amongst 5,000 UK adults between 30th August and 5th September 2018.
About Brewin Dolphin
Brewin Dolphin is a UK FTSE 250 provider of discretionary wealth management. With £42.3* billion in total funds, it offers award-winning personalised wealth management services that meet the varied needs of over 80,000 account holders including individuals, charities and corporates.
We give clients security and wellbeing by helping them to protect and grow their wealth, in order to enrich their lives by achieving their goals and aspirations. Our services range from bespoke, discretionary investment management to retirement planning and tax-efficient investing. Our focus on discretionary investment management has led to significant growth in client funds and we now manage £36.8* billion on a discretionary basis.
Our intermediary business manages over £12* billion of assets for over 1,000 advice firms either on a discretionary basis or via its Managed Portfolio Service.
In line with the premium we place on personal relationships, we’ve built a network of 30 offices across the UK, Jersey and Dublin, staffed by qualified investment managers and financial planners. We are committed to the most exacting standards of client service, with long-term thinking and absolute focus on our clients’ needs at the core. The value of investments and any income from them can fall, and clients may get back less than they invested.
*as of 30 June 2018
Dr Eliza Filby is a Generations Expert and historian of Contemporary Values based at King’s College London who researches generational developments across politics, society and the workplace. She is currently writing her second book: Family Album: The Story of Post War Britain through its generations. Eliza frequently appears on the media, is a regular on the Sky News Press Preview and has written for the Telegraph, Times and Guardian and reviewed for the Financial Times.
[1] Using an assumed growth rate of 4% net of fees would equal £587,000 at age 65. Capital is at risk. These figures are for illustration purposes only and you may get more or less than this. The value of investments can fall, and you may get back less than the amount invested. Any tax allowances or thresholds mentioned are based on personal circumstances and current legislation, which are subject to change.
[2] £100 per month invested for 15 years with an assumed growth rate of 4% net of fees would equal £24,609.05. Capital is at risk. These figures are for illustration purposes only and you may get more or less than this. The value of investments can fall, and you may get back less than the amount invested. Any tax allowances or thresholds mentioned are based on personal circumstances and current legislation, which are subject to change.