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Press Room

30 March 2009

Younger Generation On Track For Brighter Financial Futures

Financial 'expectation gap' although still high, is becoming more realistic

A more financially capable generation emerging

NatWest unveils Year 2 findings from the MoneySense Panel – an unprecedented five year survey of over 9,000 young people, aged 12-19 years, examining the effectiveness of financial education. It looks at earnings, budgeting, debt, and hopes and aspirations for their future finances.

The results from this year’s NatWest MoneySense Panel reveal a generation becoming increasingly aware of the challenging economic times they live in, and preparing for their financial futures in ways their parents never did. With more importance placed on the personal finance curriculum in schools, there is evidence of a more financially capable generation.

  • An impressive 86% of young people keep track of their money, up from 79% last year
  • 82% reported learning about money at home or at school last year with 77% looking up to their parents for advice on money
  • Over two-thirds (68%) said they knew more about managing money than last year

Financial 'Expectation Gap' Narrowing:

Young People were asked about their financial aspirations for the future on buying a home, a car, what they hope to earn and then these were measured against the reality, giving us the ‘expectation gap’. Although respondents still have high financial hopes for their futures, this year’s findings reveal that this gap is narrowing. Last year, our economic analysis shows that in total, this expectation gap equated to at least 76,967 per person or 538,765billion across Great Britain , which now stands at 72,133, a drop of 6% or 4,834 since last year. (504,930billion).

  • SALARIES: On average, young people expect to be earning an annual salary at the age 35 of 53,900 (significantly more realistic than last year’s 69,500). The current annual salary of adults is 23,893 at the age of 35.
  • CARS: 72% of 12-19 year-olds expect to own their own car by the age of 21. Last year only one in 8 drivers were aged 21.
  • DEBT: A more realistic 39% of young people believe that they will owe less than 10,000 in debt when they finish university, down from 43% last year. The actual figure is about 12,700.

'Home owning, debt-free, high earners' of the future:

These findings paint a picture of a generation which although becoming increasingly aware of the economic climate, have optimistic expectations for their future finances. This generation predict high salaries and low debt in their financial futures however this expectation gap has narrowed over the past year, suggesting a more clued-up, ‘realistic’ future generation. While this demonstrates a more cautious approach, the good news is that they have not given up on long term ambitions of home ownership. 58% of this generation hope to own a house by the age of 25. This translates to an estimated 2.3million future home-owners.

Positive and on track for brighter financial futures:

With much more importance placed on financial education in schools, and more exposure to talk of money around them, it is encouraging to note some positive trends that have emerged over the past year when it comes to attitudes towards their financial situations, keeping track of their money and seeking advice on money matters. 86% of 12-19 year olds keep track of their money and 77% of them think their parents are ‘good at managing money’. But in stark contrast 91% of adults have never received any form of financial education*.

With young people saying they receive on average 1,500 a year (124 per month) in the form of pocket money, monetary gifts, and mobile top up credit, this is a generation clearly at ease with receiving, managing and spending money.

Although only 27% are earning from household chores, in the older groups the sense of having to supplement the money they get at home is demonstrated by the number of youngsters who have part time jobs. Nearly a quarter of fifteen year olds are balancing school work with a part time job, rising to over a third (34%) of sixteen years olds and 42% of seventeen year olds.

  • Half of young people are content that they ‘have enough money’, up from 46% last year.
  • The number of young people keeping track of their money increased by 7% from 79% last year to an impressive 86% this year. A majority 62% expressed that they would not spend their money on things if they think they might need the money for something else. This suggests a level of planning when it comes to spending.
  • When asked how much more money per month would make them happy, this year young people came across less needy than last year citing 372 compared to 496. (25% less needy this year)
  • There is more acceptance of debt as a reality in life (30% up from 26% last year)
  • It is also encouraging that almost a quarter (23%) would consider the interest rate when thinking about borrowing money, up from only 17% last year.

‘Hopeful Generation’ coming down to earth:

Salary expectations at the age of 35 stands at 53,500 - significantly lower than last year’s 69,500. This compares to the current average annual earnings of only 23,893 for 30-39 year olds in Great Britain. Furthermore, the research seems to demonstrate that a young person’s earning aspirations are to some extent determined by their own parents’ salaries.

This contrast was starkly highlighted in the findings; young people from higher earning families optimistically expect to be earning an average of 56,900 at the age of 35. This contrasts with young people from lower socio-economic groups, who estimate 12,000 less at that age - 44,200 on average.

Maxine Norris, Head of NatWest MoneySense for Schools, comments:
"The MoneySense Panel results are encouraging in that young people's attitudes and behaviours towards money seem to be moving in the right direction. This will be the first time these young people live through an economic downturn which, although challenging for their parents, may encourage greater realism when it comes to their future financial expectations.

"Last year the NatWest MoneySense for Schools programme delivered almost a million lessons on managing money in 60% of UK secondary schools, and we are committed to continue this work equipping the next generation with the skills and knowledge they need to face the financial challenges ahead of them.

"Ultimately, the more exposed young people are to financial issues, and the younger they become aware of them, particularly during the challenging economic climate, the more likely they are to become responsible, forward-planning adults who manage their finances confidently and effectively."

Dr Sandra Scott, Psychological Expert, who has tracked the NatWest MoneySense Panel from the start, says:
"Young people can be remarkably influenced by changes in their parents' attitudes towards money. We may see that this change in outlook during the economic downturn could result in more savvy, informed young people with a greater understanding of how they can best shape their financial futures.

"The NatWest MoneySense Panel could be key in tracking the progress the next generation makes and we as parents and guardians should remember the importance of engaging our children on money matters as they develop into financially aware young adults."

Other Key Findings from the Research:

The panel findings revealed some dramatic differences across the country in young people’s attitudes towards their future finances:

  • Young people in the South West are best at budgeting with 89% keeping track of their money compared to 83% in the North East, North West and Scotland.
  • Young people in Scotland are the most happy with the money they receive, with 59% agreeing that they always have enough money, while in the South West only 40% are content with their current financial situation.
  • In terms of earnings it seems young people in the North West receive a massive 140 per month compared young people in the West Midlands who receive 84 a month on average.
  • 37% of young people in the SW earn money from chores while only 21% in the North West and the North East help out at home for their pocket money.
  • Young people in the West Midlands seem to have wised up the most when it comes to saying they would considering the interest rate when borrowing money (28%), compared to only 9% last year.
  • Young people in the East Midlands reported knowing more about money over the past year (75%), the highest of all the regions.
  • Perhaps unsurprisingly Londoners predicted the highest salaries by the time they reach 35: a staggering 77,400, while those in the South West were the most realistic predicting 33,700 (43,700 less than Londoners)
  • Scottish parents seem to be the most highly regarded by their children as good at managing money – 83% reported this, compared to only 69% in the North East.