LONDON—A new study reveals that one in two U.K. households, with occupants aged 35 or under, could not afford an ad hoc bill or expense of just £250, without reverting to credit or financial help from their family.
The new report from Experian, compiled over five years reveals the widening financial gap between generations. It identifies an emerging group of people, defined by four key characteristics: they’re young, they earn relatively good money, they rent rather than own their homes and they have virtually no savings (YERNS).
Representing nearly a third of all U.K. households (29.3%) – or 7.3 million Britons – the “YERNS” are far more likely to use credit cards, take unsecured personal loans, and fall behind when paying bills, the study shows.
Four in every five (79%) of these YERNS households have outstanding debt, and around two million households within this group have no savings whatsoever.
With an average age of 35, the YERNS group contrasts directly with the older ‘MORS’ generation (Mature, Owning, Risk-averse, Savers). This cautious, more content generation has an average age of 69 and is far more likely to have substantial savings, with almost half of this group (46%) with £20,000 or more in the bank, Experian said.
MORS are also far less likely to owe money, with two-thirds (64.5%) being completely free from debt of any sort. Whereas more than a third of YERNS (35.2%) have credit cards, and nearly one in ten (6.2%) have had to take a loan from friends or family members. This includes expenses for rent, car costs and holidays.
When looking at average household income across the country, YERNS households bring in more than MORS (£37,081 vs £29,051 respectively). However, the discrepancy between income and outgoings makes it far harder for the younger generation to build up savings, Experian said.
“Living in an overdraft has become second nature for many people 35 and under. The result is many young families and individuals are living beyond their means and so when unplanned costs occur, it can tip them over the edge,” said Experian’s Richard Jenkings. “This younger demographic are also the least confident in managing their money, as fewer than 150,000 YERNS believe they manage their finances well. Many now believe they will never own their own home and are instead spending their money on rent and smaller more frequent luxuries.”
With interest rates at an all-time low and credit card debt – especially among YERNS – at an all-time high, this generation is especially vulnerable to increases in inflation and any potential rise in interest rates, noted Jenkings.