Over the past year, we conducted some market research to explore the savings habits and financial engagement levels of millennials aged 23 to 36 years old. What we found surprised us.
A great many young people were saving hundreds of pounds each month into a range of savings and investment plans.
Many are budgeting hard to set aside rainy-day savings funds. Others are building holiday funds or first home deposit pots. Average monthly savings among this age group were at a very healthy £161.65.
London-based millennials were putting aside more than £200 each month.
We also discovered that this younger age group put a significant store by digital financial platforms and mobile apps.
- Many young people are saving at least £150 a month
- Leaving consumers complete responsibility for their finances can lead to poor decision-making
- If they cannot afford a financial adviser, they should leave financial decisions to workplace trustees
They were grateful, even loyal, to providers that helped them budget more effectively or offered ‘on the fly’ functionality like micro-investing in a range of investments via mobile investment apps like Moneybox; or moving surplus money into savings accounts at a stroke of the finger (which many banks now offer via their apps).
Technology can re-engage savers
They also favoured the idea of digital tools that send push notifications when their personal financial situation has changed markedly – perhaps triggered by a rise in their auto-enrolment pension contribution, a buy-to-let investment gaining equity value, or a share gaining more than 5 per cent in the last quarter.
Timely provision of new information or analysis can of course trigger engagement and action. At the very least, it is these sorts of alerts that help (re)engage customers and get them thinking about investing and saving more.
The open banking revolution has certainly made it much quicker and easier for bank account feeds to be authorised to send through their valuable transaction data to digital platforms, perhaps for automatic analysis and insight delivery or for real-time cash flow analysis and reconciliation by small business owners and their accountants.
We all know that changes in spending habits or household income levels tend to presage much more significant lifestyle changes, which can demand a financial review – creating a window for timely and informed (re)engagement by advisers.
This brings me onto a wider point about digital financial platforms, including perhaps the pensions dashboard in the future. The well-known phrase attributed to Alexander Pope circa 1709: “A little knowledge is a dangerous thing”, applies here.
As people begin to get their hands on new knowledge about their financial affairs online, there is a real danger that, having viewed these prompts, nudges and notifications on their mobile devices or PCs, they may then leap to hasty and sometimes downright poor decisions – to their financial detriment.
Lack of in-depth knowledge can prove dangerous
We have seen what happened as a result of the widespread media attention and other communication associated with pension freedoms. More than 1.5m defined contribution pots were accessed in the April 2015 to September 2017 period alone.
Of these, 55 per cent were fully withdrawn. And of these ‘withdrawers’, more than half plonked their retirement savings straight into a bank or building society.