Debate: Should millennials be saving more?

In light of findings by Barclays that millennials spend £3,000 a year on ‘treats’, debates our spending habits and whether we should really be putting money aside for home ownership.

NO –

House prices are far above our Starbucks budget

It’s old news. Repeated, lamented time and time again: millennials are broke. A cursory Google search will show that a depressing combination of lower wages, the rising cost of living, and a crippling shared national student debt has ensured that millennials do not have that much left over from their paycheck at the end of the month. It’s no wonder that they’re struggling to save. A significant proportion of the average millennial income goes on rent. A recent study by the Resolution Foundation revealed that millennials in the UK will spend £53,000 on rent by the time they are 30 compared to the £9,000 our parents spent on rent in their twenties.

Millenials in the UK will spend £53,000 on rent by the time they are 30

Owning property has traditionally been a marker of not only status and security, but the feeling of being a ‘real’ adult. With no rent to pay, you have truly settled down, no longer subject to the whims of your landlord. It is the signal to start doing the things generally expected of you, such as building wealth and starting a family. However, these qualities that come with home ownership are completely out of many young people’s reach, especially those who cannot rely on their parents for help. It’s an impossible problem to face, one that up to a third of millennials could be stuck with for their entire life. In such overwhelming odds, it’s obvious that our simple love of Starbucks is not the culprit for our financial woes. The cost of housing is definitely a glaring problem for our generation, but is skimping on £3000 worth of ‘treats’ per year, as the new study by Barclays proposes, really a viable or necessary solution?

Barclays’ breakdown on spending shows that millennials spend an average of £904.20 per annum on socialising, £738.96 on new clothing, shoes and accessories, £705.96 on eating out, £522.60 on takeout food, and £441 a on things named as ‘daily treats (coffees etc)’, with a total of £3,312.72 spent per year. In light of these figures, the study encourages millennials to make small changes to their lifestyle, such as spending less on takeaways and coffee. It’s not bad to encourage more savings among the younger generations. Nobody’s ever regretted having a savings account for emergencies. However, the study says that these changes, called ‘swaprifices’, should be made so that millennials may, one day, be able to afford that golden financial goal: a deposit on a house. The predicted savings from Barclays’ master plan? £662.54 a year.

It would take millennials 173 years to be able to afford a deposit on a property in London

It seems like such a small figure. How could it ever match up to the sky-high housing prices of today? Research by the Halifax has revealed that the average deposit in the UK is now £33,127 – up by 71% from £19,364 in 2008. So if we take these figures into account, with your average millennial taking Barclays’ sage advice and saving that £662.54, they’ll have a nice deposit in about 50 years. Depressed? Well here’s another bit of information: with the research finding that an average deposit in London is £114,952, it would therefore take millennials 173 years to be able to afford one (and that’s the figures rounded down).

Even cutting all spending, including the money spent on things that are generally necessary to a person’s quality of life such as socialising and clothes, and saving the whole £3,312.72, it would still take 34 years (again, rounded down) before a millennial would be able to afford London prices. To the average 20-something year old who has just graduated, that’s a whole lifetime away. And with a figures as large as a deposit facing many millennials, it’s easy to wonder if there’s any point in sacrificing the ‘lavish’ £8.50 per week they spend on coffee.


YES – Eleanor Shearwood

Giving up one coffee a week may not get you a house, but it might just get you something more memorable

It is, of course, reductive of Barclays to suggest that millennial spending on ‘treats’ is both frivolous and the main thing preventing them from having more substantial savings. It is about as true as the idea that all twenty-somethings live as they do on Instagram, meal prepping sweet potato buddha bowls on a Sunday evening, constructing an array of creative outfits from their twenty-piece ‘capsule wardrobe’, and spending every other day out at bottomless brunches. What I’m trying to say is that generalising millennials and their habits, whilst a seemingly popular current trend, is going to cause a backlash. It is then unsurprising that Barclays’ patronising suggestion went down about as well as that of Australian real-estate mogul Tim Gurner, who just two years ago argued that the money spent by young people on avocado toast would be better put towards a deposit for a home.

Generalising millennials and their habits, whilst a seemingly popular current trend, is going to cause backlash

If you look at the evidence, when considering their economic context, millennials just aren’t spending frivolously – or no more so than previous generations were, anyway. Research conducted by a bank, who is probably unhappy with lower savings rates, was never going to give the whole picture. It’s also worth noting that the millennial generation technically includes anyone up to their late 30s and is therefore not just a generation comprised of twenty somethings going to ‘hipster brunch bars’.

With the fees of seemingly everything on the rise, be it tuition, travel or house prices, it makes complete sense that millennials are struggling to see the benefits of putting away large segments of their paycheck. Especially when so much of it is already going towards rent and paying off student loans. And with working hard, of course money spent on ‘treats’, which Barclays defines as anything from eating out to updating their wardrobe (because who needs new clothes anyway?) is well-deserved. Everyone deserves to splash the cash once in a while, especially when it’s cash that’s been hard-earned.

And yet, the logic behind ‘swaprifices’ is undeniable, and perhaps could be beneficial in more ways than financial. Although swapping out on a latte on the commute to work or university may not buy you a house, it’s clear that a £5 a day on coffee adds up very quickly. If you were to skip this once a week you’d be left with roughly £260 at the end of the year, which could be put towards something more sentimentally valuable – concert or plane tickets, for example.

And swapping doesn’t always have to mean missing out. Barclays highlights eating out as the third spending preference of millennials. But perhaps trading a fancy restaurant for someone’s flat once in a while wouldn’t be such a bad thing and would provide an opportunity to show off those hidden culinary talents. Similarly, being slightly more mindful when planning days out could free up a good chunk of the budget. Just a few minutes spent researching could lead to discovering a free entry to events, galleries and museums. So maybe the key really lies in being creative, which would leave you with plenty of money left over at the end of the year to spend.

Developing savvy spending habits is never going to be detrimental

The outcry on Twitter after Barclays published the article is completely understandable; finding a reason to put money away each month is difficult when it seems that the ultimate motivation for saving is most likely nothing more than a pipe-dream. Developing savvy spending habits is never going to be detrimental, and whether the savings from this are then put towards a more memorable experience than (forgive me) avocado toast or a future house is completely up to you. And who knows, maybe creating mindful spending habits now will have a positive effect on the economy of the future? We can only hope- but perhaps saying cappuci-no next time isn’t a bad place to start.

Illustration by Rosie Dart.

One thought on “Debate: Should millennials be saving more?

  • Hi Tabatha (and Eleanor),

    Don’t forget that house prices are rising faster than wages so actually saving a constant amount means you’ll *never* afford a deposit on a house. Does that mean the dream is gone? No – or at least we assume not because killing their market isn’t in the interests of house builders. House builders are going to have to give up their dreams of ratcheting house prices ever higher by restricting supply though and that’ll take a change in the law to re-enable house building schemes by local authorities – the return of the “council house”.

    In some areas a lot of houses are largely unoccupied – second homes for either holidays or as an investment. Some are rented out (but at the higher end of the market rates as they aren’t owned, so the mortgage must be paid by tenants) and a lot are just … empty. Interesting initiatives by governments in some parts of the US to introduce high taxes on empty properties have shown a significant drop in house prices as those “nest egg” investment properties suddenly get sold off – plus a side order of additional tax intake through house sale taxes (much like the UK stamp duty). Of course, many of those houses are large – especially in places like London. There are also schemes to trace owners of empty houses and assist them in renovating for rental or sale. But to clear the logjam this way needs another change in the law.

    So maybe a smart investment is to sacrifice a latte or two for a political party membership?


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