Navigating the Cost of Living Crisis: 7 Key Personal Finance Insights among UK Millennials and Gen-Z
It’s been a rough few years for the young people in the UK. Not content with perpetuating pervasive isolation through multiple covid lockdowns, the arrival of soaring interest rates and historically high living costs have ensured that both Millennials and Gen-Z have endured multiple socioeconomic challenges over the last few years.
With food prices spiralling and energy costs rising off the back of global geopolitical events, even rents and housing haven’t been immune from the ripple effect, with landlords passing on successive mortgage rate rises onto already struggling young tenants.
But with the dust now beginning to settle and inflation showing tentative signs of stabilising, we wanted to uncover how the recent cost of living crisis has actually impacted the personal finances and financial situations of young people one the ground in the UK.
Cost of Living crisis is hitting finances among young people in the UK
Digital Intelligence – Human Insights
At Bolt we’re always trying to uncover and understand how current events and socio-economic shifts are affecting and shaping people’s behaviours, attitudes, and values.
Through combining quantitative digital audience understanding with the latest AI-powered qualitative research, we help our clients get the most up-to-date and contextualised insights and intelligence to help them better understand their customer’s complex needs and wants.
So we did what we do best, and took to social media to interview hundreds of young people across the UK, combining this data with the latest AI-driven qualitative research tech to help lift the lid on the – all too often hidden – financial lives of Gen-Z and Millennials in the UK.
In this post, we’ll uncover the 7 must-know insights and takeaways when it comes to how young people in the UK have been navigating their way through the recent cost of living crisis, and how it’s affected and shifted their financial habits, priorities, and banking behaviours.
Digital Intelligence – Human Insight
1. Credit Cards and Student Loans are driving a Millennial debt crisis in the UK
With 60% of Millennials in the UK currently in debt, Millennials are driving an unfolding debt crisis in the UK.
Credit Cards and Student Loans were the main drivers behind debt among young people (82%), but for those currently unemployed – 67% said they were mainly in debt due to personal loans.
And the debt problem in the UK appears to be undiscriminating – whether student, business owner, employed or unemployed, 53% of young people in the UK are currently finding themselves in debt. Among millennial parents, the problem is even more acute, with 72% either somewhat or significantly in debt.
And when it came to managing debt, there were no easy strategies – but cutting back on essential expenses like food and energy (40%) and sticking to strict new budgets (50%) were the most obvious and popular ways young people were trying to reign in spending and manage their debts.
For navigating their way out – men were the most likely to look to debt consolidation services, while young people on on higher incomes (+75k) were most likely to enlist the help of financial professionals for advice on navigating themselves out of debt.
Debt is spiralling among the young in the UK
2. 40% of young people are facing increases in their mortgage payments and rents this year
With interest rates spiralling to historic highs in 2023, just under half of young homeowners in the UK say they are facing increases in their monthly mortgage repayments, with millennials being particularly affected (48%)
While most were facing increases under £300, 29% of people on higher incomes said their payments were due to rise between £500 – £750 per month
And where interest rates rise, rents follow, with the ripple effect of higher mortgage payments affecting renters across the spectrum, with 49% of young tenants saying their rents were due to increase this year.
Nearly half are facing increases in mortgage and rent payments
3. Just 29% of 18-30 year olds feel well informed about managing their personal finances
The majority of Millennials and Gen-Z in the UK don’t feel they currently have the financial know-how and education to help them effectively navigate their way through the often challenging cost of living situation in the UK.
And this sense of lacking financial knowledge and education was particularly prevalent among students, just 24% of who said they felt they had sufficient knowledge. Conversely, international students in the UK were the group most likely to feel they were adequately informed, with 40% saying that felt confident in their financial acuity when it came to personal finances.
Millennials already on their career path were most likely to want to know more, with 44% saying they would be keen to learn more about managing their finances.
Many young people want to learn more about personal finance to better navigate their way through the situation
4. 20% of young people are now primarily using Neobanks
Mobile optimised, feature-led digital challenger banks are becoming increasingly popular among young people in the UK, with nearly 1 in 4 primarily switching to neobanks like Monzo or Revolut in place of traditional high street banks.
Females (23%) and the self-employed (32%) were the groups across all personas most likely to be primarily using challenger banks, while males (14%) employed on mid-incomes (16%) were the graduate groups least likely to be adopting them.
When it came to reasons for switching from traditional banks, 18-30s across all income brackets universally appreciated the superior mobile banking experience neobanks offer (49%), as well as the lower fees & charges (29%).
And while most people were using neobanks to manage their savings overall (48%), men were most likely to be using them for stocks (34%) and crypto (31%) specifically.
5. Bridging the trust barrier is key for neobanks to compete with traditional banks
When asked what – if anything – they preferred about traditional banks over neobanks, the majority of people stated that traditional banks’ established reputation and trust was the main advantage (43%).
Female savers in particular value the long standing relationship and familiarity they have with their traditional banks (49%).
And the sense of familiarity and trust that people feel towards traditional banks is actually driving preferences over actual products and services, with just 22% saying they preferred the financial products traditional banks offer.
6. Higher earners are in significantly more credit card debt than other income groups
26% of high earners in the UK are currently in £5000 – £10,000 of credit card debt.
And its millennials driving credit card use among the young – using them significantly more than their younger Gen-Z counterparts. Overall, just 29% of 18-24 year olds saying they regularly use a credit card at present, compared to 49% among the 23-30’s.
7. Over half of young people are using Buy-Now-Pay-Later to help navigate the cost of living crisis
56% of young people are using Buy Now Pay Later Services – with Millennial graduates also significantly more likely to use BNPL (65%) than struggling Gen-Z students (35%).
High income earners were also happy to accumulate some BNPL debt (71%) much more than those on lower incomes overall (40%).
And when it came to key offers and factors for choosing BNPL providers, low interest rates & fees and flexible repayments were the key factors people considered when choosing a BNPL provider
1 in 5 young people are turning to neobanks for savings and investments
Conclusion:
With debt spiralling among the young, the cost of living crisis has forced both Millennials and Gen-Z into multiple personal finance management strategies for navigating their way through and out of debt.
Mortgage payments feeding seemingly inevitable rent increases and food inflation and energy bills recently seeing historical rates of inflation has left young people increasingly feeling they’re lacking the financial know-how and education to navigate this challenging and ever-changing financial landscape.
With digital neobanks increasingly meeting young people’s needs of mobile-optimised, crypto friendly and feature-laden banking solutions, their intuitive mobile banking experiences and user-friendly savings management tools are increasingly drawing young people away from traditional high street banks, despite historical trust in traditional banks still proving a barrier for neobanks.
As credit cards and Buy-Now-Pay-Later services increasingly prop up the finances of young people in the UK, its clear that both Millennials and Gen-Z are making use of whatever resources or new solutions are out there to help them stay afloat through what has been one of the most financially challenging couple of years for young people in a generation.
The banks and financial providers that can understand, adapt to and meet the needs of young people in the UK, will see a shift in adoption and usage in their direction, and may end up leading a wider shift away from traditional personal finance habits and behaviours emerging out of what will in hindsight be seen as a turbulent few years for the wider UK economy.
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