It seems today’s younger generations have been struck a raw deal. They’ve been priced out of the housing market, the retirement age has risen, and they’re dogged with debt in a world that encourages them to keep spending. This is confirmed in a 2018 study from by Resolution Foundation which revealed that UK millennials are the second worst-hit financially in the developed world and it looks that they have a lack of financial education.
Another study from the National Endowment for Financial Education, indeed, demonstrates that while 69 percent rated their financial knowledge highly, only 24 percent of millennials demonstrate basic financial literacy. Could it be that through a lack of financial awareness, this generation is truly struggling to survive between Instagram posts of smashed avocado on toast? Or could it be 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 recently reached its highest since April 2012. On the other hand, highly targeted online ads, social media influencers plugging products from high-paying brands and a growing influx of ‘must-have’ subscription services are just a few of the forces encouraging them to keep spending.
Financial education is needed
There are various factors contributing to the struggles of younger generations. Student debt, which has 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 percent of graduates will not fully clear their debt within the three decades in which they are expected to complete repayment. 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, which clearly means that financial literacy is heavily required.
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,” 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.
Striking a healthy balance
This generation are facing unique financial challenges that differ significantly from those that their parents encountered that’s why for them a huge financial education is even much more important.
Clearly, younger generations would benefit from educators who 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 education and 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 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.