New research by the Institute of Fiscal Studies reveals that by the time those born in the 1980’s (millennials) hit their early 30s, they had about half as much wealth as those born in the 1970s (Generation X) did, at the same age. Millennials had average net household wealth of £27,000 per adult while Generation X had £53,000.
The figures are stark when you look at the cost of property. The average cost a baby boomer would have had to pay for a property in 1982 was £23,798, a Generation X in 2000 was £81,628 and a millennial in 2016 is £206,145. With deposits as a proportion of the purchase price averaging at 17% or equivalent of £35,044 for a £206,145 property, it comes as no surprise that more and more people are struggling to take their first steps onto the property ladder.
So what can the current millennials learn from past generations? What did past generations do to save?
Here are some Baby Boomers tips:
1. Live within your means
Take out your weekly allowance in cash as it’s easier tobudget with real money. Leave your debit cards at home and cancel your credit cards.
2. Choose your travel treats carefully
Stay with friends or relatives to take a break and only take a holiday when you really need one, not because everyone else is having one. It doesn’t have to be annual or abroad.
3. Look after the pennies and the pennies will look after the pounds!
Don’t shop hastily and buy only what you need, not what you want. There is so much choice and temptation now, but try to resist! Do what you can yourself, whether it’s ironing, cleaning, DIY or gardening.
4. Save, save save!
Set up a savings account with a monthly direct debit and put in the same amount each month. Watching your savings grow will keep you motivated when the going gets tough.
5. Plan meals, eat in and save on babysitting
Use eating out for special occasions! Entertain at home and if you are invited to a friend’s house and have kids, stick the kids in bed there, and save on babysitting.
Tips from Generation X:
1. Save your max when living at home
Don’t be ashamed of relying on your parents to help get you started. Your best chance of saving quickly is when living at home. It will be much harder when you rent.
2. Get savvy about money
However complex finance may seem, take time to get your head around it because no one will do it for you. Use your weekends to get wise – crazily they just didn’t teach it in school.
3. Beware of brands
Try not to get hooked on brands and end up paying over the odds for anything from trainers to mobile phones. Financial security is more important than what your friends think.
4. Focus less on material things
A career can be very rewarding and will give you satisfaction that doesn’t involve hitting the credit card. Socialise with friends and colleagues at cheap or free sport activities such as football or netball, rather than spending the night in the pub.
5. Build your knowledge so you won’t be afraid to take the plunge
Even if work is demanding make time to know the property market. Book days off and use holiday for viewing properties, so when you have your deposit in place, you are ready to pounce on any good opportunities.
What else could Millennials do to make savings?:
There are some expenses that were not culturally part of the lives of the baby boomers and Generation X, which the millennials now take for granted. Easy things to cut back on are:
1. TV Entertainment
Baby boomers and Generation X would have just watched terrestrial TV and paid for a TV licence. Another option would have been reading a book – from the local library! Although less convenient, the emergence of pubs showing sports means it’s possible to see the match and save harder for a deposit.
Having a car for baby boomers was not a given and they would have tried to live near walking distance to transport and shops. An option for millennials to save money on transport is by joining a carpool scheme.
Gyms with high tech modern equipment didn’t exist for baby boomers and were just taking off for Generation X. After two decades of expensive memberships the good news for millennials is that competition is making gyms cheaper – so shop around! Or exercise for free - running and walking are a great way to keep fit.
4. Snacks and drinks
Baby boomers and even Generation X were not in the habit of grabbing shop sandwiches and hot drinks on a regular basis. It’s quick and easy to make your own sandwiches and over time makes considerable savings.
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