New research published today by the Money Advice Service has identified that while over two thirds of young adults (69%) say they have financial goals, most don’t have a plan to reach them.
Analysis carried out for the Money Advice Service by Professor Tina Harrison and Caroline Marchant, identifies three main groups of young adults.
There are ‘Planners’ (37%) who have financial goals and a plan to reach them. ‘Dreamers’ (36%) who tend to have financial goals but no plans to reach them and ‘Drifters’ (27%) have neither goals nor plans. The report finds that when young adults do make a plan, this is usually for short term ‘Save to spend’ goals. Nearly half (47%) reported saving for a holiday and 30% were saving for a car.
Attitudes to money differ greatly between the three groups. Over half of ‘Planners’ (52%) understand it is important to keep track of income and expenditure; over two fifths (45%) feel it is important to shop around to make money go further; and 37% think it is important to save money for a rainy day. 54% of ‘Dreamers’ get anxious thinking about their financial situation. Only one fifth of ‘Drifters’ (20%) agree that saving for a rainy day was important.
The report discovered that there are a number of factors linked to young adults’ motivation to set financial goals and make a plan to reach them. This includes their level of financial confidence and independence. Young adults are the least confident age group when it comes to financial matters (45% compared to 58% of all adults) however, our study suggests that financial confidence grows with experience and not just with age.
Financial confidence tends to increase when young adults undergo a change in their lives that pushes them into independence, for example; going to college or university; leaving home and renting a property; job seeking or getting a job. Dreamers and Drifters are more likely to be financially dependent on their parents. This reliance on family for support and guidance often delays the need to make important decisions about their money, in turn reducing experience of financial matters and therefore financial confidence. Young adults who are least confident are three times more likely to have problem debt. Of the 24% of young adults who are over-indebted, only one in ten are seeking advice.
Beyond family, many young adults are unsure where to turn to for help with their money. They are overwhelmed by the quantity of information available and there is confusion about what support is available both on and offline, with some services perceived as being only for people who are in crisis. The research also highlights the challenges faced when trying to engage young people and encourage them to think about their financial goals and plans.
There are some simple steps that young people can take to plan for their financial goals:
- Plan out what you want to achieve and when, however short-term – Think about the type of things you want to save for, the likely total costs, and when you need the money by. This might be for transport costs to get to work, college or university; the cost of a trip or holiday; buying and running a car or scooter; saving a deposit for a flat or house.
- Make a budget – The Budget Planner can help with this. Work out how much money you will be able to save each week or month. The Money Advice Service’s Savings Calculator will help you plan out when you will reach your savings goal.
- Be money savvy – Be clever with your spending to make sure you are able to put money away. Take a look at the Quick Cash Finder for ideas.
Caroline Rookes, Chief Executive of the Money Advice Service, said:
“This research is a valuable input to our strategy for improving financial capability across the UK. It is great to see that some young people have financial goals and are already starting to build good savings habits, but a worrying number of young people are not setting financial goals and may be storing up trouble for the future. We now need to motivate them to make longer term plans to help them achieve these financial aspirations.
“Families can help by encouraging their younger relatives to plan for their financial futures. There are plenty of tools and calculators available on the Money Advice Service website to help them find the information they need to help with this.”