Millennials are facing challenges in achieving their financial goals due to ‘lifestyle inflation’, a new study has found. The research, which involved 4,000 adults born between 1981 and 1996, revealed that 40% believed they would have saved more money by this stage in their lives. However, the tendency to increase spending as income rises has impacted their ability to save, with four in 10 admitting to prioritising lifestyle improvements over financial savings.
On average, millennials find themselves £25,000 short of where they had expected to be, with a third confessing to focusing on spending rather than reaching financial milestones. The study, conducted by first direct, also highlighted that 30% of participants anticipated higher earnings at this point, but one in three chose a better work/life balance over pursuing a higher income. Additionally, a quarter had envisioned homeownership by now but are, on average, still four years away from purchasing their first property.
The rising cost of properties and income instability were cited as key factors delaying millennials’ financial plans. Despite these challenges, a significant 73% of the generation remain determined to achieve their financial objectives. Notably, 61% feel they have grown more financially resilient in recent years after facing economic obstacles.
Carl Watchorn, head of banking at First Direct, acknowledged the hurdles faced by millennials, highlighting their adaptability and resilience in navigating adverse conditions. He noted that although financial milestones may seem out of reach, the generation has shown remarkable resilience in securing their financial futures.
The issue of ‘lifestyle inflation’ was not exclusive to millennials, as the study found consistent trends across all generations. A third of participants admitted to treating themselves more often with salary increases, while 17% opted for more holidays and 14% indulged in pricier trips. Watchorn emphasised that higher incomes are often redirected towards immediate gratification rather than long-term savings.
In conclusion, the research underscores the financial challenges faced by millennials and the broader impact of ‘lifestyle inflation’ on saving habits. Despite setbacks, the generation’s determination and adaptability position them strongly for securing their financial future amidst economic uncertainties.