Millions of young people struggling to save as they face more financial hurdles than previous generations

Two thirds of all adults agree there are more barriers to Generation Z achieving financial well-being, including higher cost of living and insufficient education.

Five million young people (aged 16 to 27) were unable to save over the past two years, with over three quarters admitting they couldn’t afford to put cash aside for a rainy day due to a lack of income or high debt. This is according to a new report from Yorkshire Building Society, which cited the increased cost of living and inadequate financial education as just two barriers preventing many young adults from forming a healthy savings habit.

Almost a third (31%) of Generation Z (‘Gen Z’) – those born between 1997 and 2012 – admitted they couldn’t withstand their monthly outgoings increasing by £100, while almost half (46%) confirmed they dipped into their savings at least once a month to pay expenses over the past year.

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“It’s sobering to see the stark reality of just how many of our young people are struggling to simply pay their bills and to build the financial safety net that we all need in a crisis,” said Chris Irwin, Director of Savings at Yorkshire Building Society.

In contrast, a smaller portion of the wider adult population (27%) relied on their savings to cover costs - including just 11% of respondents aged over 55.

These generational discrepancies led almost two thirds (63%) of all adults to agree that today’s youth face more obstacles to achieving financial well-being, despite being some of the first to receive lessons on topics such as tax, debt and mortgages as part of the national curriculum.

A generation of inactive savers

Among those young people who can afford to save, almost half (1.4 million) fail to shop around for the best rates. In fact, over half of all Gen Z admitted to lacking confidence in choosing the best savings account for their goals, according to Yorkshire Building Society.

Its report estimates a further 800,000 young people would benefit from higher interest payments if they were as likely as other generations to compare savings deals before applying for an account. Meanwhile, an additional one million are missing out on returns by holding their savings in a no or low-interest current account.

By tackling these poor habits, Yorkshire Building Society’s modelling suggests £226 million a year overall could be generated in higher interest payments for Gen Z.

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Inadequate financial education

As well as lacking confidence in their ability to save effectively, almost two fifths (39%) of Gen Z respondents revealed they were uncertain about making important financial decisions.

While part of the national curriculum since 2014, less than half of young adults said they’d received financial education during their school years. Of those polled, less than a third could recall lessons tackling topics such as debt, interest and credit.

“To help more people build confidence when it comes to finances, we believe there is more that can be done by the Government as well as other organisations such as ourselves,” Irwin concluded.

“This is an issue that requires attention as a matter of urgency to ensure we can address the serious challenges young people are experiencing, receiving a comprehensive financial education in a meaningful and timely manner from an early age is a key recommendation from our findings.”