Older millennials are unarmed for financial shocks.
Up and down the country household incomes are stretched and too few people have the Money Advice Service (MAS) recommended 90 days’ worth of outgoings in savings to protect themselves against a financial shock.
We are increasingly warned about a ‘debt bubble’ that’s sweeping the nation and it’s understandable that this is impacting people’s ability to save.
However, this poses a real problem - too many people in the UK could find themselves financially vulnerable if they lost their main source of income.
As part of our ‘Income Roulette’ research, LV= decided to look closer at this issue and see how financially resilient different groups in UK society really are. And we started with the younger generation.
Each week the media is littered with news of millennials stuck in an endless cycle of renting, being squeezed by large student loans, and relying on the bank of mum and dad – or even grandparents – to help them get by.
So it should come as no surprise that we discovered 25-34 year old renters are one of the least financially resilient groups in the UK, with nearly half stuck in a renting rut, while a similar proportion were unable to save anything at all.
In fact, a staggering two thirds don’t have the level of savings specified by MAS – almost double the national average.
This group say debt is their biggest barrier to saving, claiming student debt and credit card bills as the biggest obstacles.
Yet if they don’t have enough money put aside to cope with a rainy day, then they could find themselves struggling to pay their rent, bills and loans should illness, accident or sickness strike.
Our research found that as much as 45 per cent of late-millennials who rent could only survive for up to a month if they lost their income, and two in five aren’t confident in their ability to handle such a personal financial crisis.
Income protection (IP) can provide a vital financial safety net in for such circumstances, but worryingly less than one in ten in this group has it, with the main barriers being that it’s seen as too expensive, or people don’t trust it would pay out.
It’s important that as an industry we dispel these myths. In reality people in this group can pay less than £10 a month for a monthly IP benefit of £1,000, and data from the Association of British Insurers has shown that over nine in ten income protection claims were paid last year.
We know some advisers have these concerns too, so to help arm themwith answers and reassurance for their clients, we’ve created an FAQ guide which can be found on our website.