According to a new study from insurer LV=, renters among the late-Millennial generation (25-34 years old) are one of the least financially resilient groups in the UK.
Based on research conducted with over 9,000 people, the first instalment of LV='s 'Income Roulette' research found that more than half (55%) of 25-34 year olds fall short of the Money Advice Service (MAS) recommended amount of savings to be financially resilient. Resilience can be defined as someone who has 90 days' worth of outgoings in savings, however the research found that a third (34%) of late-Millennials could only survive for one month or less if they lost their income. These figures are even more pronounced for renters of this age, who make up almost half (45%) of the group.
Two-thirds (65%) of 25-34 year olds who rent don't have the level of savings specified by MAS – almost double the national average (37%) – and 45% could only cope for one month or less without their income. In addition, more than two in five (44%) aren't confident in their ability to handle a personal financial crisis, again far higher than the UK average (33%).
This group of renters among late-Millennials are particularly struggling with debt, leading to LV= dubbing them 'Generation Debt'. 43% say they can't save any money at all with student debt being this group's biggest obstacle to saving (40%), followed by credit card bills (32%). Half (51%) have some form of unsecured debt and one in five (20%) owe more than £5,000. Further to this, double the national average are in their authorised overdraft (21% vs 11%) and this group are three times more likely to have a loan from friends or family (12% vs 4%).
If they were to lose their main source of income, fewer than one in ten (7%) renting 25-34 year olds have a form of income protection insurance to fall back on, despite the fact cover of £1,000 a month can cost less than £10 a month*. In fact, almost one in four (22%) would plunge themselves into further debt by putting even more on their credit cards and 3% even admitted they would turn to a pay day lender.
To tackle financial insecurity in the UK, particular among older Millennials who rent, LV= is calling on the Government to ensure that the new Single Financial Guidance Body (SFGB) has a specific remit to focus on increasing financial resilience among consumers. This should include looking at the role of individual income protection insurance and considering how Government and industry can increase the take up of private insurance to protect consumers against financial shocks.
Justin Harper, Head of Policy for Protection at LV=, said: "It's worrying that so many older Millennials have no idea how they would cope in a personal financial crisis, but those stuck in the cycle of renting are suffering even more. It's clear that people in this 'Generation Debt' are at risk of finding themselves struggling to make ends meet if they lost their income.
"We want the Government's new single financial guidance body to have a specific focus on helping build UK financial resilience. It's vital that more is done to encourage individuals and families to prepare and protect themselves against the consequences of accident, sickness, or disability."
Despite so few people in this group having an income protection insurance policy, the chances someone would need it are higher than they might think. LV= calculations show a 30 year-old, female, non-smoker who wants to retire at 65 has a one in four (26%) chance of not being able to work for three months or more in their working life. This increases to around one in two (47%) when looking at the risk of being unable to work for two months or more.
To find out what your chances are of being out of work or suffering a serious illness, go to https://www.lv.com/life-insurance/useful-information/life-insurance-risk-calculator and use our simple tool.
LV= has also come up with five tips to help 'Generation Debt' take control of their finances and build up their financial resilience:
Methodology for consumer survey: YouGov, on behalf of LV=, conducted online interviews with 9,495 UK adults between 5th and 10th July 2017. Data has been weighted to reflect a nationally representative audience.
Methodology for recognised benchmark of financial resilience: Money Advice Service (MAS) guidelines for financial resilience state that 'people should hold an emergency fund of three months' income. LV= identified the 'least financially resilient' groups based on the combined factors of how respondents fared against the MAS definition and how confident respondents reported to feel about being able to manage a financial crisis.
Late-Millennial renters were identified as one of the least financially resilient groups using the following methodology: 25-34 year olds (Late-Millennials) were identified as the least financially resilient age group with 55% falling short of having 90 days' worth of outgoings in the bank against the national average of 37%. Within this age group, 65% of renters fall short of the MAS benchmark, and 44% lack confidence in handling a financial crisis, versus the national average of 33%. 43% of this age group are unable to save any money at all - this is 5% higher than the national average of 38%.
LV= serves over 5.8 million customers with a range of financial products. We are the UK’s largest friendly society and a leading financial mutual.
When we started in 1843 our goal was to give financial security to more than just a privileged few and for many decades we were most commonly associated with providing a method of saving to people of modest means. Today we follow a similar purpose, helping people to protect and provide for the things they love, although on a much larger scale and through a wide range of financial services including insurance, investment and retirement products.
We offer our services direct to consumers, as well as through IFAs and insurance brokers.
Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. LVFS is a member of the ABI and ILAG. Registered address: County Gates, Bournemouth BH1 2NF.