Fewer than one in 10 millennials have achieved their financial goals, with ‘lifestyle inflation’ being a significant factor, according to a study.
The research, which surveyed 4,000 adults, found that 40 per cent of those born between 1981 and 1996 believed they would have more savings at this point in their lives.
Four in 10 said that ‘lifestyle inflation’, the tendency to increase spending as income rises, has affected their ability to save. Instead of saving more as their earnings grew, they focused on enhancing their lifestyle. Nearly a third indulge themselves more frequently when they receive a salary increase, taking more holidays, and embarking on more expensive trips.
A third admitted they had prioritised other objectives over reaching financial milestones. On average, millennials find themselves £25,000 short of where they thought they would be due to high living costs (65 per cent) and unexpected expenses (44 per cent).
The study also revealed that 30 per cent expected to be earning more than they currently are, but one in three decided to prioritise work/life balance over pursuing a higher income. A quarter had anticipated being homeowners by now, but on average, they are still four years away from owning their first property.
Over four in ten (44 per cent) attribute rising property prices to delaying their plans, while for 36 per cent their income has been too unstable over the years to buy a property.
Despite the challenges, three quarters remain committed to achieving their financial goals. and two thirds believe they have become more financially resilient in recent years after facing numerous economic hurdles.
Carl Watchorn, head of banking at First Direct, commented: “As a millennial bank marking its 35th anniversary, we understand the challenges faced by the millennial generation.
“Our research indicates that millennial and Gen Z savers are hitting significant milestones later than their parents and grandparents. This is undoubtedly exacerbated by tough economic conditions in recent years.
“However, it is precisely these obstacles that have moulded millennials into one of the most financially resilient generations. Their ability to adapt and navigate through adversity means they are now better equipped than ever to move forward and secure their financial futures.”
She adds: “In the current environment, we are seeing younger generations in particular report that they expected to be in a better financial position by now than they are.
“It’s therefore understandable that people are prioritising enjoying the here and now over saving for financial milestones that may feel a touch out of reach.
“Our research does indeed show that lifestyle inflation is a common trend, with higher incomes often being funnelled into increased spending, rather than put aside for the long-term.”