It’s no surprise that millennials are struggling to save for their futures. So we asked Michelle Pearce, Chief Investment Officer from online investment platform Wealthify, for her thoughts as to what they can do to make their money work harder.
Born between 1980 and the mid-90s, this group’s coming of age collided with the worst recession in a generation. As young adults they’ve faced a challenging job market, wage freezes, higher living costs and record low interest rates. Unlike earlier generations, by the time they began their careers, many were saddled with university debt and then faced paying as much as half their monthly salary on rent, all of which has seriously affected their ability to start saving properly. Those who can save still face an increasing burden of ownership, with the loan-to-earnings ratio doubling on mortgages since 1983 when house prices were just 2.7 times national average earnings, compared to over 5 times today and over 10 times in London.
In light of this, many disillusioned millennials have simply given up on saving for a home or retirement – and who can blame them? Back in the 1980s their parents would have found savings accounts all over the high street offering in excess of 10% annual return. Today’s savers are lucky to receive a 1% rate and rising inflation may continue to undermine the value of those savings.
So going forward, what can millennials do to boost their savings efforts?
Investing in the stock markets can provide better, inflation-beating long-term returns if you have the time and know-how to build and manage a well-diversified portfolio. But who does? To the vast majority of UK savers, investing is a murky, complicated world, riddled with hidden costs and uncertainty. However things are rapidly changing.
The boom of the fintech industry has resulted in new technology services revolutionising the way people deal with all aspects of their money, including investing. Financial solutions, such as fully-managed investment services, previously thought of as too expensive and too complicated to get into are being opened up to the masses.
There’s no denying millennials have it tougher financially than their parents, but in other respects they are at a distinct advantage. The first digitally-native generation, millennials have grown up in a semi-virtual, constantly connected world. They’re also savvy consumers and confident online purchasers, displaying less brand loyalty and willing to trust new digital players. As a result, they are far better positioned than their parents to benefit from the raft of emerging fintech companies that are using technology to disrupt the status quo and change the way financial services are delivered for the better.
New technologies like Wealthify’s robo-investing service aren’t scary to millennials, offering them easier and cheaper ways to try and grow their money without the need to learn the ropes of navigating the stock market. These services are well-positioned to transform the UK savings market, allowing savers to invest some of the £700B currently languishing in cash savings accounts. And millennials, now representing the greatest lifetime value of any other banking customer, will play a huge part in that transformation.
Wealthify have a vision to democratise investing by building and managing investment plans for anyone with £250 or more to invest. They are currently live on Seedrs to help fund the next stage of their development. Visit seedrs.com/wealthify to learn more. Capital at risk.