Jackie Davies, Customer Operations Director at OneFamily, discusses the impact of rising costs on young people, how it’s stopping them from achieving ‘traditional’ life goals and what financial services companies can do to help.
 

I’m sure everyone has been feeling - at the very least - a pinch from the ongoing cost-of-living crisis, regardless of the life stage they are at. Whether you’re a renter, homeowner, single person or parent, it would’ve been almost impossible to escape the impact of rising bills and everyday costs over the last couple of years.

But what about those who are just getting started in their adult life – how is it affecting them?

At OneFamily, we recently carried out some research to find out what young adults want out of life and how the cost-of-living crisis is impacting them. It shows adults between the ages of 18-40 are having to make tough choices about their priorities and the more “traditional” paths are falling way down the priority list because of affordability.

The average cost of getting married, buying a house and having children in the UK has soared to almost £395,000, according to our research. This has increased by £35,000 in just two years, up from £360,000 in 2022. Of course, this is an average and costs for these different life events vary from person to person and across different parts of the country. 

But we’re also seeing priorities among young people starting to change. Gone are the days of buying a starter home, getting married and then having a family.  More than half of those aged 18-40 say their top priority is simply to live comfortably, which is an aspiration that suggests high rents and growing bills are making life very uncomfortable indeed for half of our young adults. The second most popular life goal is to go on holiday and less than a third now see buying a house as a top priority. Getting married or having a wedding is even further down the list, with just one in ten seeing this as a top life goal.

We’ve spoken to our customers and they’ve told us that some of their dreams are having to be put on the backburner simply because of the cost-of-living crisis. Katie Oliphant has a OneFamily lifetime ISA and is saving up to buy a house with her partner, Cormac. The couple are renting in Cambridge and say the cost of rent makes it difficult to save for a house and get married. Katie told us that in an ideal world she’d like to get married soon, but “absolutely extortionate” wedding costs would get in the way.

It's clear times are tough and this means many are struggling to achieve their life goals. But what can be done to help this generation of young people?

Well, there isn’t one quick and easy fix, but the financial services industry will definitely need to play an important part. What it can do is continue listening to its customers, understand what their goals are and discover what blockers are getting in their way. With this understanding, we can develop – and improve – our products and services to make sure they still meet the changing needs of customers and give them the support they need.

A good example of this is the lifetime ISA (LISA). This product, set up by the government, helps people maximise their savings for their first home by providing a 25% bonus. In a time where rent costs have risen, making it harder to save, getting this bonus makes a real difference. It gives people that extra push to help them get closer to their goals.  But there’s one snag… if the cost-of-living crisis means they need to dip into their savings in an emergency, then they not only have to repay this bonus, but effectively they must pay a penalty on top.  This means they have had a big bite taken out of the savings that they have worked so hard to put away.  We don’t think that’s fair.

House prices have been pushing ever skyward, but the LISA can only be used to buy a property of up to £450,000 – which means that the limit hasn’t kept up with the market.  So, if you live in the south of England or a city centre it’s quite possible that your dream home could be valued higher than this – so you can’t use your LISA pot and keep the bonuses that you’ve accrued.  Instead, you have to withdraw the money and pay the penalty. Fair? I don’t think so.

So, we’ve recognised improvements need to be made and have campaigned for the property cap to be raised and the penalty to be reduced so people don’t lose out on their own savings. This is just one example of why we, as financial services companies, must look at how situations evolve for our customers and make sure our products adapt to keep up with changes in a way that puts their best interests at heart. I’m sure you have also encountered similar situations with your customers.

Campaigning is just one example of how financial services can support young adults who are struggling to embark on the next stage of their lives. But the key here is getting to the core of what they are experiencing and to develop products and services to meet their needs in a way that prioritises their needs. 

Our role is going to become ever more vital since this generation is going to need all the help they can get as they continue to battle against rising costs.

Find out more: Visit OneFamily website

OneFamily are Associate Members of the Building Societies Association.