According to new research from Aviva and the Future Foundation (1), many of those born between the early 1980s and 2000 are dealing with the tricky issue of saving for the future in the way an ostrich might deal with danger: they’re putting their heads in the sand and hoping the problem goes away.
While 16- to 34-year-olds have always been tempted to spend now and save later, the Aviva research suggests the current generation of young adults is facing unprecedented financial and social pressures.
The result is often anxiety, apathy and a ‘live for now’ attitude that could undermine the future financial happiness of thousands of members of what experts have termed Generation O (for Ostrich).
External pressures
Not that those pressures are of Generation O’s making, says Alistair McQueen, Savings and Retirement Manager at Aviva. He believes rocketing property prices and dwindling workplace pensions are to blame.
“Also, graduates can easily enter the job market today with £50,000 of debt (2),” he adds. “This compares to previous generations that faced no fees and even benefitted from grants to cover the cost of living.”
With those pressures in mind, it’s no surprise that the Aviva survey revealed significant numbers of young people feeling stressed, anxious or overwhelmed by their finances.
Nor is it surprising that 64% admitted not saving as much money as they’d like every month, with a third saving nothing at all.
Social pressures
On top of these very real financial pressures, 16-34-year-olds are facing an even more insidious threat. Social media has in many ways been a boon for our social lives. But if you grow up with social media as a ubiquitous presence, you’ll know that it can also elicit unrealistic expectations about what life might offer.
“For generations there has been a desire to ‘keep up with the Joneses’, says Alistair. “In the past, ‘the Joneses’ were neighbours on your street. Today they can live on the other side of the world and they can number hundreds or thousands via social media. Keeping up with so many would be tough for anyone.”
The pressure to keep up is borne out by the Aviva research (1), which found that 35% of Generation O want more control over their appearance, while a significant minority consider the latest technological gadgets a ‘necessity’.
Meanwhile, technology has also introduced an era of online shopping and contactless payments, taking away the psychological sting which comes from handing over physical cash.
The result of all this is clear. We are bombarded everyday with the edited highlights of hundreds or thousands of other people’s seemingly extravagant lives. Everyone’s life can look mundane in comparison to a social media feed, and it all ramps up the pressure to keep up and keep spending.
The future
This sounds a little bleak, at least for the future finances of today’s Generation O. The Aviva survey (1) revealed that more than one in ten simply want to live in the moment and spend what they want, with little thought for the future.
But Alistair believes there’s a chink of light in the gloom. “Despite this backdrop, the younger generation must be given credit for rising to the challenge of saving. Under-35s now represent the biggest cohort of savers in private personal pensions,” he says.
These younger savers are to be encouraged. Despite the pressures of social media, student loans and property prices, a significant number of Generation O are saving at least something for the future, even if many of their peers are not.
But young adults clearly need help in this area, and auto-enrolment, a law which requires employers to set up and contribute to workplace pensions for many of their employees, is intended to encourage all of us to save more for our futures. This system makes it a legal requirement for all UK employers to provide a workplace pension, and over 10 million eligible employees will be automatically enrolled.
Auto-enrolment is a start, but small minimum contributions mean it’s far from the complete solution. Increasingly, the responsibility for saving is being passed to the individual. For Generation O, one positive first step towards a brighter financial future is refusing to be swayed into unaffordable spending by the social media highlights of other people’s lives.
Find out more about planning for your financial future at Aviva. Pick up hints and tips, use the Shape My Future tool to see how much you might need a week when you retire to live the life you want.
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(1) Meet Gen O: ‘The Ostrich Generation’, Aviva
(2) UCAS