Young savers are too focused on short term-savings, research claims, and risk falling behind if they don’t set long-term savings goals.
Savers aged between 18 and 27 are overwhelmingly focused on immediate financial milestones, with 33 per cent saying they are saving for travel plans, while just 22 per cent put money away for retirement.
This compares with 63 per cent of Generation X, aged between 44 and 59.
Some 30 per cent of Generation Z are saving for house deposits and 21 per cent for a car purchase, according to new research from wealth manager St James’s Place.
Short-term savings goals are important, but younger savers are at risk of missing future savings targets by failing to start early, SJP said.
This comes after figures from Hargreaves Lansdown that indicate that as few as a third of Generation Z are on track with their pension saving.
Saving is an incredibly important part of ensuring your personal financial security, and forms the backbone of being able to cope with emergencies, invest, save for the future and be able to afford large purchases.
As many as 87% of savers say working to a specific savings goal can act as a major motivator to consistent saving, St James’s Place says
How to be a better long-term saver
St James’s Place says savings goals that form part of a winder financial plan can lead to consistent and positive savings habits.
This means that savings should be allocated to both short term goals and longer-term goals, such as for retirement.
Building a financial plan can help savers to prioritise their saving, and make sure their money is working for them.
Claire Trott, head of advice at St James’s Place, said: ‘Setting clear goals and building a plan, with the right professional support, is what can help turn good intentions into real financial confidence.’
Building up your savings can be easier said than done, however, with would-be savers often struggling with managing budgets, choosing the right accounts to save in and making maintaining a consistent approach.
As many as 87 per cent of savers say working to a specific savings goal can act as a major motivator to consistent saving, St James’s Place says.
And two thirds say setting out clear goals has helped them to become better at saving and investing.
Despite this, it found just four in ten people have a plan on how to achieve their financial goals.
St James’s Place says working to save with a partner or family member can help young people to create accountability and motivation to save.
Nearly two thirds of younger people said saving with someone else helped them to stay on track, with two thirds of 18-34 year-olds more motivated when saving together.
In comparison, just 16 per cent of 18 to 34-year-olds, said they find social media savings challenges motivating.
Claire Trott, head of advice at St. James’s Place, said: ‘Saving is often seen as a solitary exercise, but our research shows that shared goals can be far more powerful.
‘Younger generations, in particular, are motivated by doing things together – whether that’s saving for a home, travelling or building financial security with a partner.
‘Turning that shared motivation into long-term planning is the next big challenge.’
I’m a pro-boxer: Setting savings goals has helped me not lose sight of my future
Adam Maca, an 18-year-old professional boxer from Brighton, says setting financial goals has helped him to keep one eye on his future even as his sporting career is just taking off.
He said: ‘I do have to think about the long term – my retirement from boxing will be a lot earlier than most people’s retirement, so I need to make sure I’m in a good position when I reach this, and have money coming in to live on.
Maca says he hopes planning ahead can ensure he can live comfortably after retiring from boxing
‘You see with a lot of athletes, that after their professional sports careers are over, they have to take on lower-paid manual work to keep the income going. I don’t want to have to do that.’
Maca, who made his professional debut back in June and has won his first three professional fights by knockout, is coming to terms with his newfound success as a full-time athlete.
It has also brought with it a new set of financial demands, however.
‘I’ve got to keep performing in the ring,’ he says.
‘I can’t reach the long-term goals without achieving the short-term goals.
‘The budget for training expenses, coaching, a nutritionist, strength and conditioning and management has to be covered first, then I can think about what is left for long-term savings and enjoying life a little along the way.’
Maca already has a financial adviser, Ben, which he says helps him to make sure he is on track for his future.
He said: ‘Hopefully planning carefully will mean that I can live comfortably and not have to work, which means I can spend my time exploring other interests, maybe running a gym and enjoying time with friends and family.
‘While it is a big step at such a young age, having good people around me, including my financial adviser Ben, has made all of this run really efficiently.
‘I know how much I need to be keeping to one side for tax and how much I have to spend on training costs and for personal spend including savings toward my longer-term goals.
‘If I didn’t have Ben and others around me, it would have been a lot more difficult, and I would’ve spent a lot more money than I have without thinking about taxes and putting some away for the future.’
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