Generation Save: Young Shunning Debt and Saving More Than Parents
New research from BNPL provider, Clearpay, has shown that despite being the generation hit hardest by the pandemic, Gen Z and Millennials are the most financially savvy generation in the UK – with 68% of Gen Z and 61% of Millennials budgeting and saving more responsibly than their older counterparts.
The Accenture report reveals that in addition to topping up the piggybank, young people are also more cautious with debt. While as many Millennials have credit cards as Gen X did at the same age, their outstanding balances are 10% lower. This follows recent research from The Bank of England that reveals that consumer credit growth fell by 9.9% annually – the biggest slump since records began in 1994.
And when it comes to investing in the future, younger generations are the leaders in the uptake of remote banking and investment apps, with nearly three times as many young people (59%) using online apps to invest their money than older generations (19%). Millennials and Gen Z are also over 80% likely to use contactless, over 30% likely to use mobile payments, and over 50% likely to use BNPL.
Damian Kassabgi, executive vice president for public policy at Clearpay says, “There are often misperceptions that young people are bad at saving and investing their money. However, our research has shown that they are actually more cautious than many of their older counterparts and more committed to responsible spending. The pandemic has prompted a surge in customers looking to spread out the costs of products without being subjected to extortionate interest rates and payment terms. Young people have seen the value of flexible payments, and therefore it’s not surprising they are leading the charge in the payments revolution and becoming more spending savvy as a result.”
As the UK finally starts to emerge from lockdown, it seems that Gen Z was the generation hit hardest by COVID-19, with 11% losing their jobs during the pandemic vs. just 4% of Millennials, Gen X, and Baby Boomers. Since 2020, Gen Z was furloughed at double the rate of older generations – as social distancing rules and lockdowns proved more likely to affect employment across hospitality and retail trade.
In addition to this, wealth has also fallen by 10% over the last decade for younger age groups, whereas for age groups 55+, wealth has increased by as much as 30%. The drop is driven by property ownership falling by 23% and student debt quadrupling over the last 10 years.
This means, homeownership is becoming less attainable for younger Brits, as housing costs have increased six times as fast as income. In the last 20 years, house prices have nearly tripled while median income has increased by only 30%. Therefore, 44% fewer Millennials own homes as Baby Boomers did at their age, while Gen Z is nearly 50% more likely to rent than Gen X.
Damian Kassabgi added, “During the pandemic, we have seen a 134% increase in customers opting to use our service, with 95% of customers choosing to pay via their debit instead of credit options. Over the last 12 months, we have seen a definite shift towards more flexible payment options that help customers budget and save for their future.
Unlike some BNPL providers on the market, Clearpay specifically allows for responsible spending and our inbuilt protections mean that customers cannot fall into a revolving debt trap. We do not charge interest, late fees are capped and we automatically pause an account if a single payment is late.”