Good job, no savings: Meet the young professionals with less than a thousand dollars in the bank

ohOnce upon a time there was a young woman who had £40,000 in the bank. This princely sum was earned over a decade of scrimping and saving, with a little help from the government's lifetime ISA scheme, which gave you £1,000 if you managed to deposit £4,000 in a year, topped off with, oh… .inevitably, the Bank of mom and dad (in this case just mom). She felt safe and secure, knowing that if something happened (a sudden job loss or an unexpected health condition) she would have a financial cushion to help her weather the storm.

Then, he did what you're supposed to do when you finally acquire that level of cash: he bought a house. And, within a year, almost every penny of those once-lofty savings had been destroyed. She – or she should say “I” – had officially joined the contingent of 11 million working-age Britons who currently have less than £1,000 savings in the bank.

This is according to a new report from the Resolution Foundation and the Abrdn Financial Fairness Trust, which found that those with access to less than a thousand dollars represented approximately one in three working-age households. The UK is estimated to have a £74 billion shortfall when it comes to money set aside for emergencies and retirement, compared to if each household had a minimum of three months' wages saved.

When I saw this, I almost laughed out loud. Three months' salary? I'd be lucky if I could save enough for three days.

I bought my property in autumn 2022. I wasn't too bad financially at first, despite living alone for the first time and having to pay all the bills as a family on one income. However, last year, as prices rose, the cost of living crisis began to take its toll and unexpected expenses like a new roof took their toll. I found myself having to repeatedly dip into what little savings I still had. Every month, I put £200 into my emergency fund. Each month, I moved it back into my current account, along with a little more, during the week before payday. As it currently stands, I have (deep breath) exactly £305.69.

To put this into context, I work full-time in a job on a salary that puts me in the top 25 per cent of earners in the UK. I don't consider myself to have a particularly extravagant lifestyle; I don't own a car, I rarely buy clothes other than the occasional £5 Vinted t-shirt and I'm in the incredibly lucky position of not having had to pay for a holiday in almost a decade, thanks to my previous job as a travel editor. .

It's true that I have a penchant for restaurant dinners and spicy margaritas. If I really wanted to, I could give up those precious nights out with friends. But sometimes I think, to what end? Yes, it's irresponsible, but it doesn't seem like I'll ever be able to save enough funds to cover the most important things: fixing the waterproofing, getting married, retiring (ha, the very idea!), so why? Do not spend disposable income. do Do you have treats that will bring me joy?

This sentiment is shared by Grace*, a 40-year-old mother of one who works as a full-time, well-paid editor. She currently earns £50,000; her partner also works full time. Even so, it is difficult for them to save something every month.

She and her partner have a total of £102 in savings although, she hastens to add, the amount of debt they have racked up thanks to an unexpected tax bill means they are really in the red. “I have always lived a very precarious existence,” she tells me. Having had an early career characterized by low-paying jobs, Grace assumed that she would finally start saving when she earned more money. “But I have a better life when that happens,” she says. “If you've had to keep your belt reasonably tight for a while, the temptation is to enjoy being able to relax a little. The lifestyle change is real. Earning more, you think: we can go to the movies instead of watching Netflix; “We can afford to pay for a babysitter and go out to eat.”

“Lifestyle change” is the idea that as our income increases, so does our standard of living. Things that were once considered luxuries become the norm. That's why you see stories about undeniably rich people who claim to be struggling: their expenses have increased in line with their finances. A new kitchen, a second home, private school fees and several vacations a year are no longer considered “a good thing” but “necessities.” MP George Freeman is perhaps the perfect example of this phenomenon; He made headlines last month for saying he would resign as science minister because he could no longer afford his mortgage payments. This was despite having a salary of almost £120,000 a year, putting him in the top 1 per cent of all British earners.

However, the mortgage problem highlighted by Freeman is real. Grace's mortgage rate was previously 1.5 percent; will jump to around 5 per cent when they remortgage, costing hundreds of pounds more a month. Meanwhile, childcare alone costs them £1,500 a month: “Everything is very expensive.”

While Ophie, 35, from Kent, earns significantly less than Grace, she has far fewer major expenses. She works three jobs (as an artist, waitress, and shop assistant) that add up to more than a full-time job. By renting an apartment with her husband, who works full-time, Ophie frees herself from the costs of owning a home; she doesn't own a car; and she has no children. Still, she says, she currently only has £130 saved.

“At one point that would have terrified me,” he tells me. “The thought of not having an escape route… Now, I'm just numb.”

Ophie, who has never been out of work since leaving education, has always found saving money a challenge. “The cost of living crisis has not helped as a continuation of Covid,” she says. “But my entry into the world of work also occurred during the financial crisis. “It has always been a struggle.”

Ophie has accepted that if a big unexpected bill comes in, she and her husband will just “make it work.” Most recently, her beloved dog needed surgery that pet insurance would not cover. The £900 cost of the procedure was paid directly and reimbursed in monthly installments. “Nowadays I'm pretty indifferent about it,” she says of the loans. “Unfortunately I've gotten used to it.”

Deputy headteacher Clare* from east London, who currently earns £46,000 a year, reports a similar struggle. The mother of three has a personal and a joint bank account; currently both are overdrawn. “I had some savings before I met my husband,” she says. “I was always good with money. But we bought our first house and renovated it, and then had two children, before moving to a larger house that we also renovated. In terms of moving up the pay scale at work, our SLT (senior leadership team) froze salaries to help the school’s finances about four years ago.”

She says it's “scary” to find herself in this financial situation at age 40, but she tries to look on the bright side: “I live in a beautiful house and we can afford to pay the bills, so we're very lucky.”

So how do we get into a position where many of us don't have a monetary safety net?

Education is an area in which the UK has historically been weak. Two-thirds of young adults who experienced financial difficulties believe that better financial education could have helped them, research by the Center for Social Justice think tank revealed. Although financial education was officially added to the curriculum of local authority-run secondary schools in 2014, it was largely incorporated into non-core subjects such as PSHE, with the FOOTThe Financial Education and Inclusion Campaign (Flic) found that pressure on teachers and lack of time impacted service delivery. Meanwhile, it is still not even mandatory for free schools and academies.

And arriving early makes a difference. A 2022 survey by the Money and Pensions Service (MaPS) found that children who received meaningful financial education were more likely to save money more regularly, feel more confident managing their money and demonstrate positive money management skills In day to day.

There are at least some signs that things might be changing on this front; In November 2023 it was announced that MPs would investigate the UK's shortcomings in teaching financial literacy in a formal review. The UK Strategy for Financial Wellbeing has set a target for two million more children and young people to receive meaningful financial education by 2030.

The answer proposed by the Resolution Foundation, the think tank behind the original savings research, is to take advantage of the current automatic enrollment pension plan. It has suggested increasing contributions from 8 to 12 per cent (with employers and employees contributing 6 per cent each) and setting aside 2 per cent of the total money in an easily accessible “top-up savings” scheme of up to £1,000. , that people can resort to early retirement when they need it.

As for Grace, although she has recently been thinking more about saving, there is still little incentive to do so. “There's really nothing that encourages us to save,” she says. “The government doesn't want you to save; wants you to spend to benefit the economy. So really, by dining out, I'm helping us all!

*The names have been changed.