Compulsory bills now absorb nearly two thirds (62%) of all income for millennial households, OneFamily has found.
Official statistics indicate that across the country, monthly rent or mortgage payments account for over £7,000 a year, commuting costs £3,504 and utilities cost young households over £1,500.
Other costs considered essential are mobile phones, plus wi-fi/TV at home which add up to over £2,000 every year. When compared to their parents’ generation, housing costs have increased significantly. In the late 1980s, rent was close to a fifth of young people’s income (20%).
Nici Audhlam-Gardiner, managing director, OneFamily Lifetime ISA, said: “These statistics show that young people are focused on reaching life goals, despite the fact that it’s arguably harder for them than many previous generations.
“The ‘avocado generation’ label is often levelled at millennials for their spending habits, but as our research demonstrates, their priorities are in tangible goals rather than frivolous spending.
“The fact that they are saving so much is being driven by the vast majority of this generation wanting to get on the housing ladder.
“Those saving for a first home should consider a Lifetime ISA which benefits from a 25% government bonus of up to £1000 a year.”
However, since 2003 rents have steadily risen faster than income. They now make up approximately 26% of post-tax income for young renting households.
Furthermore, today’s young households face paying new and higher bills compared to 25 years ago. Mobile phones, wi-fi and increased commuting costs gobble up a further fifth of their disposable income, which would have been much lower or non-existent for previous generations.
Young people are sometimes accused of being frivolous spenders and living in the ‘here and now’, compared to previous generations.
However in 2017 under-30s households spent less than other working households on non-essential spending, including meals out (15% less), cinema or theatre trips (38% less) and personal grooming (33% less).
They also spend 31% less on alcohol overall when compared to other working households. Meanwhile, young households are spending their money in areas we might not assume.
They spend £1,513 a year on items to make their living arrangements nicer, around 15% of disposable income for a millennial household. This includes £1,000 a year on furniture and £150 on household appliances and homewares.
Despite these costs, the young generation are continuing to work towards their financial goals, saving more monthly than any other age group – £194 a month, compared to an average of £174 for all UK adults.