Capital Markets Corporate

June 21, 2019

Millennials – the new squeezed middle?


It’s common knowledge that the so-called “Bank of Mum and Dad” is a major player when it comes to UK lending. Parents are predicted to hand out £6.3 billion worth of loans this year in a bid to help their children onto the property ladder, making them equivalent to the UK’s 11th biggest lender.

But the tables could be turning – and the Bank of Mum and Dad is now accepting deposits as well as withdrawals.

As many as 49% of millennials are reportedly giving financial assistance to their parents, for example by helping to cover bills and everyday expenditure or more expensive care costs.

This growing trend not only flies in the face of the stereotype of millennials generally being a drain on their family’s resources, but also demonstrates why this age group shouldn’t be treated by financial services organisations as one homogenous group.

Millennials are broadly defined as those born in the early 1980s and mid 1990s – meaning the term encapsulates both those in their early twenties and mid-thirties.

The life experiences of these age groups are, of course, vastly different. Someone in their early twenties could well be a member of the boomerang generation, having returned to the family home after a brief absence, or simply never flown the nest to begin with. As many as 3.4 million young adults aged 20-34 now live with their parents.

Our recent research report, Who Caught the Millennial Bug?, identified that 61% of those aged 16-24 have not yet achieved financial independence, suggesting many may still be reliant on the odd handout (or even regular financial support) from their family.

However, at the other end of the millennial scale, the research also identified a series of significant life events happening in quick succession in our thirties: respondents said that on average they intend to be married by 31, have their first child at 32, and buy a home at 33. Complete financial independence is generally achieved by age 34. Add to this the strain of financially supporting parents – and potentially their own children – and many millennials clearly have a lot on their financial plate.

Just as the millennial generation encapsulates a wide age gap, so does their parent’s generation – the baby boomers. Baby boomers typically range in age from 55 to 75, with those at the upper end of the age scale much more likely to need financial assistance from their family members. As the financial fortunes of millennials become increasingly intertwined with that of their parents’, it’s clear that family finances and status can have a significant bearing on millennials’ financial plans.

Understanding the nuances of this age group is key to financial services organisations looking to tap into what effectively represents their fast-growing future customer base.

The recently derided comments from Housing Secretary James Brokenshire, suggesting young people should be allowed to dip into pension pots to fund their first home deposit, suggests that understanding of millennial financial issues is often poor.

But with millennials typically making life-changing financial and personal decisions over a short period of time, financial services businesses that do not effectively position themselves as a partner of choice are missing a huge opportunity. By playing an active role in helping their customers navigate this extremely exciting but daunting period of their financial lives, companies can build strong relationships that last well into older life stages.

As the next generation of high-earners and consumers, knowing what makes millennials tick is critical for growth – and understanding the financial journeys and quirks of different age groups within this generational bracket is key.