The Savings Gap: Young Brits feel the pinch as 48% fear they won’t be able to save enough to reach life goals

Cost of living crisis wreaks havoc on personal finances but new developments in Open Banking to benefit Gen Z and Millennials looking to find new ways to save and make money

LONDON, 29 June 2022 – New research from GoCardless, a global leader in direct bank payment solutions, reveals the nation’s ‘savings strife’ as the rising cost of living in the UK is forcing younger generations to rethink how they manage their finances. 

For 63% of Gen Z and Millennials, the rising cost of living crisis means struggling to save; the crisis also causes them a harder time covering everyday expenses (40%) and worries about paying off debts like credit cards and student loans (44%). 

The tough economic conditions, including the highest rate of inflation in 40 years, is also swiping plans for the future: 48% believe they won’t be able to save enough money to reach their life goals, such as starting a family or buying a house. Getting on the property ladder also feels increasingly out of reach, with over half (54%) saying it’s ‘impossible’ to save a deposit for their first home, rising to 62% of 18-24 year olds. This is in stark contrast to those aged 45-54 -- though even 33% in that age group believe home ownership is unattainable. 

Closing the savings gap

Frustration over their inability to save means that 54% of Gen Z and Millennials plan to explore new ways to save and make money over the next 12 months. However, the research reveals this may not be as easy as it seems. 

Four in 10 (43%) Gen Z and Millennials who find it difficult to manage their money also  admit they find it difficult to develop new spending habits that would help them meet their financial goals. At the same time, 31% acknowledge they just don’t have time in their everyday lives to think about budgeting or managing money - highlighting the need for a fast and easier way to keep on top of their personal finances. 

Open Banking ‘sweeps’ in to save the day

Open Banking technology is developing and as early as July 2022, UK banks will start to introduce Variable Recurring Payments (VRPs), a form of payment instruction that can be set up and used to make a series of future payments. The first type of VRP is “sweeping”, which will enable Brits to move their money easily between accounts that they own, such as from their current account to their investment account. VRPs will help people clear debts and build savings by putting their money to work, faster. 

This new tool is a perfect match for the demands of younger generations: 55% of Gen Z and Millennials stated they would use new technology to automatically move their money to an account with a higher interest rate, and 53% would use it to pay a debt, such as clearing the balance on their credit card.

GoCardless has partnered with Charlotte Jessop, Financial Educator and Founder of Looking After Your Pennies, to raise awareness of the issue and offer simple tips to help with saving in the current climate and reaching savings goals, to help close the savings gap. Jessop said: “The challenges that we are facing with our finances right now can feel overwhelming. But there are a few rays of hope. Not only can the younger generations learn the frugal living tips of our elders, such as meal planning and repairing worn-out clothing but new methods of managing money are coming. VRPs offer a good example of this, which, once released, can help people put their money to work faster through automated, secure transfers of money from one of your accounts to another.”

Duncan Barrigan, Chief Product Officer and Chief Growth Officer at GoCardless, said:

“The cost of living crisis is taking its toll on personal finances and Gen Z and Millennials are especially worried, both for their bank balance today and their future financial goals. It’s not all bad news, however. The introduction of VRPs opens the door to a simple and faster way to put spare funds to work, and we urge everyone to look out for VRPs; your bank could start to offer them as soon as July. It’s a great first step for those who don’t know where to start with money management and once you set them up, they’re automatic -- perfect for those who are short on time.”

How do VRPs work?

A VRP will allow customers to safely connect authorised payments service providers to their bank account. Providers can then make a series of payments on a customer's behalf within agreed parameters, offering more control and transparency than existing alternatives. 

Once ‘sweeping’ comes into effect, consumers can use VRPs to move money between two accounts that they own. For example, an account holder could set up a VRP requesting that any spare funds in one account at the end of the month be automatically ‘swept’ into another account that is in overdraft, potentially reducing interest charges or fees.

To find out more about Variable Recurring Payments, visit our dedicated page here.

Notes to editors

All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 3796 adults, of whom 2536 Gen Z and Millennials. Fieldwork was undertaken between 9-13 May 2022. The survey was carried out online. The figures have been weighted and are representative of all UK adults (Aged 18+).   

For more information, contact: Linda Yang, Head of PR, GoCardless lyang@gocardless.com +44 7533575155