Tech drives young people to better savings habits

Younger people (those aged 18-34 years old) are more likely to think negatively about their ability to save cash than older people (those aged 55 and over), but conversely may also make better savings decisions longer-term, according to new research published by UK savings platform Flagstone.

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A survey, commissioned by Flagstone and conducted among 2,000 UK adults by independent research firm Opinium, highlighted concerning signals among young peoples’ attitudes towards saving money. When compared with those of older people, poor attitudes can be up to twice as prevalent.

Almost half (46%) of young people say they haven’t enough savings to be bothered earning interest from them (compared with less than a quarter (23%) of those aged 55+)

More than 2 in 5 (42%) young people don’t see savings as something to make money from (versus less than 1 in 3 (32%) those aged 55+).

And more than 1 in 3 (35%) say that they simply don’t have time to research or set up new savings accounts (a sentiment shared by less than 1 in 5 (18%) of those aged 55+).

Young people are more than twice as likely to say that they don’t know enough about the savings market to make good savings decisions (45% of 18-34 versus 21% of those aged 55+).

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Despite these negative attitudes, however, when it comes to their habits and actions, younger people often show greater decision-making power when it comes to how and how much they save, compared with their older peers.

Young people (18-34 years old) are more than three times more likely than older people (aged 55+) to regularly check and manage savings as part of a goal-oriented approach to reach specific financial goals (38% vs 12% respectively)

They are almost twice as likely to say they have achieved or made strides towards savings goals compared with older savers (33% vs 18%)

And on the route towards those goals, younger people are also twice as likely to accept a bit more risk on their savings for a better return (52% of 18-34 year olds vs 26% of 55+).

They also recognise the need for cash management – younger people are 44% more likely than older people to admit that if they were a bit more proactive they could earn more interest vs older people (62% of 18-34 year olds, vs 43% of those aged 55+)

But younger savers do need more support, with almost a quarter (23%) of 18-34s saying they would save more if they have more confidence in their ability to make the right savings decisions, compared with less than one in ten (9%) of older people.

The same proportion (23%) say they would save more if they have a better understanding of how best to manage their money (versus just 6% of those aged 55+).

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For instance, almost half (47%) of younger people say it simply doesn’t occur to them to switch savings accounts for better rates (versus just a third (34%) of those aged 55+).

Claire Jones, head of strategic partnerships at Flagstone, said: “In a market where the cost of living remains high, house price growth is primed to outstrip inflation, and wage growth has dipped, it’s so important that younger people feel supported to make the most of every pound they have in their possession.

“There’s a balance to be struck between tying up your money in long-term investments, property or career-long pensions, and keeping some funds more liquid yet still working hard. But savvy personal financial management is not an innate skill that most people are born with. There is such a benefit to receiving financial education when you’re younger; and once individuals start accumulating some wealth, getting the right sort of advice to bolster that is hugely valuable.

“Technology comfort levels play a huge role too. Using the right kind of technology helps us gain confidence in our finances, make better financial decisions, and manage our finances more ably. As their younger, ‘digitally native’ clients accumulate wealth, the advisers who embrace technological innovation to make their clients’ personal financial journeys easier stand to benefit the most.”

Abigail Ford, Senior Adviser, St James’ Place, said: “The data shows us positive green shoots, where younger people are demonstrating improved tendencies towards saving versus their older counterparts. I would attribute this to their attitude towards and engagement with technology. Regardless of age, those who embrace savings as an asset class are generally also those who have embraced technology which is an effective rival to and combatant of inertia.”

Ed Shardlow, financial planner, Ablestoke, said: “Anyone whose memory stretches back to 2003 and earlier, knows that higher interest rates mean it’s possible to generate worthwhile returns on cash. They might even be of an age that remembers a time when some people were even able to live off their savings. Younger people, however, have lived with historically low rates and so are unable to see cash in the same way. It’s harder, therefore, to get younger people to engage with cash as a result.

“Younger generations have technology on their side, however. These people have grown up with the internet and for them, jumping from one rate to another, managing multiple accounts with multiple banks, or getting tips on how to take control of their finances from social media, blogs and YouTube are all completely instinctive behaviours. This could explain why, while their attitudes to saving cash are poorer than those of older generations, this data suggests that when they’re motivated to start saving, they’re faster to adopt good habits.”