Millennial woes of ‘negative wealth’
Brewin Dolphin’s Adrian Watson seeks solutions to financial difficulties faced by millennials
Millennials have many things in their favour. Now in their 20s and early 30s, they are arguably the most educated generation in history and have grown up in a digital era full of new opportunities.
However, they are also struggling with more university debt than any generation to date. At the same time, rising house prices and living costs have made it increasingly difficult for millennials to get on to the housing ladder.
The significant challenges faced by younger adults are revealed in stark detail in the newly published Brewin Dolphin Family Wealth Report.
It reveals that around 15% of 25 to 35-year-olds feel that major life goals, such as home-ownership, seem so unachievable that it discourages them from saving.
Produced with the think-tank Centre for Economics and Business Research, the report found that 37% of households where the main income earner is aged 25-34 have “negative financial wealth”. That means their liabilities exceed the level of their assets.
Given their lack of saving, and without a home of their own, the future for millennials can appear bleak.
However a solution to their financial woes may be closer to home than they think. A one-off gift from a parent or grandparent can transform a millennial’s life, giving them the financial leg-up that they so desperately need.
Many grandparents will have already considered supporting their family financially by leaving an inheritance at death.
But millennials need help now. If they can afford it, older people should consider gifting wealth while they are still alive.
Tapping into the Grandbank – the bank of their grandparents – can secure a deposit for a house and help kick-start saving.
This can be transformative for grandchildren, taking them out of the rental trap and on to the property ladder immediately.
Money saved by buying, rather than renting, could be invested into an ISA or a pension for the future. Provided the grandparents survive for seven years, this has the added benefit of reducing their estate for inheritance tax purposes.
Adrian Watson is division director, financial planning, at Brewin Dolphin, Cardiff.