Why Today’s Financial Landscape is Tougher for Young People – and How We Can Help

We’ve all heard people say, “Young people today just don’t save like we used to,” or the classic, “If they spent less on coffee and avocado toast, maybe they could afford a house!” But the reality is far more complex. For many young people in the UK, the current financial climate is vastly different from what previous generations experienced. Let’s break down some of the reasons why young adults today are feeling the squeeze—and how understanding these challenges can help us create better financial strategies.

1. Housing Costs: A Different Ball Game

Housing affordability is one of the most significant shifts between the 90s and today. Back in 1993, the average UK house price was around £51,000. Fast forward to 2024, and that figure has jumped to over £285,000. Adjusted for inflation, it’s still a massive increase. Not only are property prices higher, but rent has also become a major burden, with many young people spending 30-50% of their income on rent alone. This makes it challenging for young people to save for a deposit, pushing homeownership further out of reach.

2. Rising Dependence on “The Bank of Mum and Dad”

The rise in living costs has led to more young people relying on family support. In fact, the percentage of young adults living with their parents has more than doubled from 8% in 1971 to 17% in 2021. Many young people need financial help for everything from house deposits to covering tuition fees, as student loans continue to increase. Unlike the 90s, when government funding covered most university costs, today’s students graduate with debts of £40,000 or more, adding another layer of financial stress.

3. Stagnant Wages Amid Rising Living Costs

In the 90s, wages kept pace with inflation much better than they do today. Wages have been mostly stagnant over the past decade, while inflation continues to climb. Even though people might be earning more in absolute terms than they did in the 90s, the purchasing power of that income has decreased. Essentials like food, transportation, and especially energy bills are taking up a larger share of income than ever before. According to a recent study, 7.4% of people’s income now goes towards energy bills—the highest percentage since 1985.

4. The Mental Health Toll of Financial Stress

Financial stress is now one of the leading causes of anxiety among young people in the UK. A study by Mental Health UK revealed that 81% of young adults cite financial worries as a major source of stress. This anxiety affects other areas of life, from career choices to personal relationships, and contributes to a sense of being “stuck” in a cycle of just getting by.

Taking Action: How Roots to Froots Can Help

At Roots to Froots, we’re committed to helping young people navigate this challenging financial landscape. Our workshops and resources are designed to improve financial literacy, teach better money management, and empower young people to take control of their financial futures. Whether it’s learning to budget, understanding investment options, or building a positive money mindset, small steps can make a significant difference.

Here are six practical tips to help young people become more financially fruitful:

1. Create and Stick to a Budget: Track your income and expenses to understand where your money goes. Allocate funds towards essentials, savings, and discretionary spending. A budget can help you avoid overspending and make sure you’re saving consistently.
2. Build an Emergency Fund: Aim to save at least three to six months’ worth of living expenses. This fund will provide a cushion if unexpected expenses arise, like car repairs or medical bills, preventing you from going into debt.
3. Reduce High-Interest Debt First: Focus on paying off high-interest debts, such as credit card balances, before lower-interest loans. High-interest debt can quickly accumulate, so paying it down as soon as possible can save you money in the long run.
4. Automate Your Savings: Set up automatic transfers from your main account to your savings account each month. Automating savings ensures you’re consistently putting money aside without having to remember or manually transfer it.
5. Start Investing Early: Even small, regular investments in a retirement or savings account can grow over time through compound interest. Explore low-cost index funds or beginner-friendly apps, but always consider your risk tolerance and seek professional advice if needed.
6. Increase Your Financial Knowledge: Take advantage of financial education resources, such as workshops, podcasts, and books. Understanding concepts like investing, tax planning, and budgeting can empower you to make better financial decisions and achieve long-term stability.

By implementing these steps, young people can begin to build a more stable financial future and work towards financial freedom. Small actions today can lead to big rewards tomorrow!

Today’s financial challenges may be daunting, but with the right knowledge and support, young people can still find ways to thrive. Check out our latest podcast episode, where we dive deeper into these issues and share practical tips for managing money in today’s economy. Listen in, and take the first step towards financial freedom!

Remember: It’s not just about how much you earn, but what you do with it.

Listen Now to our podcast on this topic and empower yourself to take charge of your financial journey. 🎧 #RootsToFroots #FinancialWellness #MoneyMatters #FinancialFreedom