InvestmentsMay 4 2023

Cost of living crisis could make investing 'unattractive' to young

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Cost of living crisis could make investing 'unattractive' to young
Pexels/Alaur Rahman

The cost-of-living crisis is discouraging younger people from investing, according to research from Charles Schwab UK. 

In its latest Investment Forces report, Charles Schwab revealed three out of four (74 per cent) investors were rethinking their plans, and more than half (55 per cent) were scaling back their investments. 

The survey, which spoke to 1,000 UK respondents, revealed there has been a 6 per cent decline (to 36 per cent) in the number of investors who were increasing how much they invest.

Among a range of macro themes, including interest rates, the value of the pound and turmoil in the cryptocurrency markets, UK investors ranked the cost-of-living crisis as having the biggest impact on investment decisions – and not just in the short-term.

Confidence in investing has fallen steadily since December 2021 when the last survey was conducted. 

Charles Schwab expressed concern that investing itself was becoming increasingly unattractive to newcomers, with the number of ‘new’ investors - those who have taken up investing in the past year - dropped 5 per cent from 23 per cent to 18 per cent since December 2021.

Since December 2021, 19 per cent fewer millennials said they found it easy to make investing decisions and, when they did, more than three-quarters relied on advisory services to help them (in comparison to 62 per cent of boomers). 

Around 74 per cent of Gen Z investors have needed to make extensive changes to their investment strategies to avoid big losses in the last three months, compared to 27 per cent of boomers.

Almost three quarters (73 per cent) of Gen Z investors are unsure how best to adapt their investment strategies to protect against losses in the current financial climate; this rises to 74 per cent among Millennials but drops to 50 per cent amongst boomers.

Confidence in making investment decisions as a result of the market uncertainty has also declined drastically amongst younger investor groups. 

Richard Flynn, managing director of Charles Schwab UK, said: “The current socioeconomic environment in the UK is having a worrying effect on the behaviours and attitudes of British investors. 

“The majority of UK investors are now looking to scale back their investments, or have already done so. It is also worrying to see so many young investors struggling to make investment decisions – almost three quarters of Gen Z and millennial investors don’t know how to adapt their investment strategies to protect against losses in the current financial climate.”

Flynn added: “It is vital that they have access to educational tools and resources to help them navigate the ongoing market turbulence.”