Members of Generation Rent – young adults who’ve been priced out of the home market by skyrocketing house prices and stagnant wage growth – are living increasingly precarious financial lives. According to a new report, more than one in three (35%) don’t have enough in savings to last a month. This means that even the smallest financial emergency could spell disaster.
So, how can this generation improve their situation and possibly build some financial resilience? Here is everything you need to know.
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What’s up with the finances of Generation Rent?
Focaldata has conducted a survey on the financial habits and wellbeing of tenants and property owners in the UK. Hargreaves Lansdown analysed the data and highlighted the following:
- More than one in three private renters (35%) have savings that would last less than a month. This compares to one in six (17%) of those with a mortgage and one in twenty (6%) of those who own their homes outright.
- The financial vulnerability gap between renters and owners increases with age, with the gap being the biggest among the over 65s.
- Only one in five (19%) say their finances are in good shape, compared to half (50%) of those who own their home outright and a third (35%) of those with a mortgage.
- Nearly half (48%) of renters save less than £50 a month, compared to 26% of property owners.
Why does Generation Rent not have enough saved?
According to Sarah Coles, personal finance analyst at Hargreaves Lansdown, one of the reasons that more renters could be having problems building a sufficient savings nest is that they typically have to spend far more of their income on rent than homeowners spend on mortgage repayments.
The data shows that renters spend almost 30% of their income on rent, compared to 20% for those with a mortgage.
And in the midst of a spending squeeze that has resulted in the price of almost everything going up, it means that many renters are often left with little in their budget to put towards savings.
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What can Generation Rent do to boost their savings?
If you are in this group and feeling trapped or financially vulnerable, don’t panic. By practising certain smart financial habits, you can lower your vulnerability to unexpected emergencies and build some resilience.
Here are Sarah Coles’ top five tips for doing so.
1. Draw up a budget
Creating and sticking to a budget is the ultimate weapon for saving money and spending less. There are numerous budgeting apps available to assist you with this task. You can also take advantage of apps such as Plum that use artificial intelligence to analyse your spending and calculate the amount you can afford to save.
2. Make some lifestyle changes
This might mean giving up on some things that you don’t get a lot of value from. This could mean cutting down on streaming services, subscriptions, or social outings and so on. Anything you think you can live without you should consider cutting out.
3. Once you’ve freed some money, pay debts first
It’s much harder to make ends meet when you are also servicing expensive debts every month.
See whether you can transfer your debts so that you pay less interest on them. For example, if you have a large credit card debt that you are currently paying off, consider transferring it to a 0% balance transfer card to give yourself more time to pay it off without accruing additional interest.
4. Be strict on taking debts in future
According to Sarah Coles, you should never borrow for things you want, only for things you need. You should also never borrow without a well-thought-out plan for repaying the debt.
5. Build an emergency fund
Once you’ve repaid your debts, direct any extra cash you’ve freed up towards building an emergency fund. Aim for at least three to six months of living expenses. Put the cash somewhere you can easily access, like an easy-access savings account, since you never know when you might need it.
How else can members of Generation Rent save money?
If you’re a member of Generation Rent, here are three ways you can boost your savings and build more financial resilience:
- Switch your bank account and earn extra cash. Nationwide, Lloyds and Santander are all currently running switch offers. You can earn free money simply by moving an account over to them.
- Get a side hustle. This is another great way to earn some extra money to put towards your savings. Here are a few simple and affordable side hustles that are worth a look.
- Reduce your bills. Check whether you are getting the best deals for your electricity gas and insurance, and switch to cheaper ones where possible.
