Young Brits give up on trad. banking amid cost of living crisis
Consumers facing tough economic conditions, including the highest rate of inflation in 40 years, are clamouring for new ways to get their personal finances in order after calling time on long-standing tactics.
According to new research from GoCardless, a global leader in direct bank payment solutions, 23% of the UK population report traditional methods of building wealth, such as savings accounts and investing in bonds, are ‘not for me’. This is largely due to the belief that interest rates are too low to grow their savings (41%) and some approaches are just too complicated (34%).
Given their gripes with the status quo, it’s no surprise that 45% of consumers plan to explore new ways to save or make money over the next 12 months, rising to 55% of Gen Z and Millennials. Budding savers are more likely to experiment, with 26% of 18-24 year olds and 22% of 25-34 years olds willing to invest in new asset classes such as cryptocurrencies in order to boost their wealth, compared to 17% across all age groups.
Young savers feeling the squeeze
Although many are suffering in these tough times, young people seem to be especially hard hit. Over half (57%) of Brits reveal the rising cost of living means that they are struggling to save money and 35% say it’s caused them to struggle to cover the cost of everyday expenses. However, these proportions rise amongst those aged 18-41 to 64% and 41%, respectively.
And it’s not just causing hardship in the here and now. Four in 10 (46%) 18-24 year olds worry that their current inability to save will stop them from reaching future life goals like starting a family or saving for a house. This jumps to 52% of 25-34 year olds, compared to 34% of those aged 45-54.
Consumers ready to embrace new technology
Against this backdrop, Brits are open to new methods to help them regain control over their finances. Half of consumers say they would use new technology that automatically moves their money from one account to another with a higher interest rate (53%) and to pay off their debts, such as clearing the balance on their credit card (50%).
The push for new solutions is perfectly timed with the introduction of new Open Banking technology. The latest development — rolling out from July this year — is 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.
Duncan Barrigan, chief product officer and chief growth officer at GoCardless said: “The research indicates many of us feel ‘tried-and-true’ methods of building our wealth are outdated, overly complicated and frankly, no longer suited for the environment we live in. The good news is, better ways of managing our money are on the horizon, such as Variable Recurring Payments. Banks will start to introduce them as early as July, so we encourage everyone to keep an eye out and set up your automatic transfers. VRPs will move your money exactly where you need it, when you need it — from paying off a loan to paying into a high-interest savings account.”