A product of the Credit Crunch – Young Savers
Let’s face it, the past 5 or 6 years have proved to be really tough for a lot of people. Many feel that they are starting to see some light at the end of the tunnel but with a possible interest rate rise on the horizon, we may not be out of the woods just yet.
So has anything good come out of this difficult financial period? I recently spotted a post on the Scottish Friendly twitter feed which suggested that there might be something good to come from it after all and that is the effect that it has had on the mentality of the young when it comes to saving.
Learning the lessons of a lack of available credit
Some people would argue that of all of the generations to be hit by the credit crunch, it was the young who were hit hardest. Yet it appears that the young are reacting positively to their recent trials. The Scottish Friendly study focussed on the age group of 18-24 year olds and stated that young Britons were bucking the trend of generations before them by choosing to save their money rather than to spend it. Research has shown that more than five million – or 66 per cent – of 18-24 year olds are managing to put away some money each month and place it into some kind of savings account or investment vehicle. Is it a serious amount of money? The research found that on average each one was putting aside roughly £204 per month, which I’d say is pretty impressive for a so-called lost generation.
So why the sudden change from generations before them? I can only assume it is because tightening lending criteria has generally made it more difficult for the young to get credit. Many will have quite literally been ‘forced’ to save for the things that they want.
Secondly, we have the housing market. As we all know, for some time now mortgage lenders have been demanding larger deposits in return for a mortgage offer. Whether you agree with it or not, the governments ‘Help to Buy’ scheme has helped many people out in this area enabling them to buy a house with only a 5% deposit, but that is still a hefty chunk of cash for most people to have to find. With 100% mortgages seemingly a thing of the past – at least for now anyway – many young people have realised that if they ever want to get onto the housing ladder in the future, they quite simply need to get saving. Even if 100% mortgages were to return it would be unlikely that we would see 100%+ borrowing for a very long time, so savings would still be needed to pay for any associated costs involved with buying and then furnishing a home.
Finally, during the recession newspapers were dominated with stories of how unemployment had hit the young. This demographic now realise just how easily their livelihoods can be affected in the event of an economic downturn. This will likely have impressed upon them the need to have some sort of emergency fund in place to see them through if hard times do return.
So it seems that every cloud has a silver lining after all. If the credit crunch really does prove to be a turning point in the mentality of the young with regards to the need to save and plan ahead then that has to be a good thing, doesn’t it?