Exploring the financial divide between generations
Earlier on this year, research found that Millennials, or Generation Y, are suffering from lower living standards and a drop in the average salary, compared to that of older generations. Compared to earlier years, there appears to be a dramatic shift in the financial comfort of the various generations. Where young adults once enjoyed being fairly affluent, this has now seen amongst the older generations, including pensioners.
There are various factors that have caused this financial divide between generations and the decision for the UK to leave the European Union earlier this year is bound to eventually impact this divide, too.
The research findings
Looking at data from the UK Data Service, the Financial Times were able to compare 50 years worth of income statistics for around 800,000 households. In the past, younger adults used to benefit from better finances than over 60% of the rest of the population, even after the costs of housing. However, due to the recession back in 2008 and 2009, the standard of living for young adults has now been pushed down, so that they have better finances than just 37% of others.
On the other hand, The Guardian found UK pensioners have seen a fast and dramatic increase in their disposable income. In fact, their income has grown 3 times as quickly as that of Millennials.
What has caused this financial divide?
There appears to be several factors that are contributing to the huge financial difference between generations, including the recession as mentioned before. Other factors include the rise in house prices and the cost of rent, unemployment levels, globalisation and debt.
Yet while some of these factors have been rectified, with others on their way to being reduce, the UK and the younger generation could potentially be facing a new problem – Brexit. Back in June, the country saw a shocking divide between the older and younger generations and their opinions on whether or not to remain part of the European Union.
73% of 18-24 year olds and 62% of 25-34 year olds voted to stay, whereas 57% of 55-64 years olds and 60% of 65+ year olds voted to leave. There has been a lot of discussion concerning the voting divide, with many younger adults highlighting their concern that the older generation has decided the future for them. But what could Brexit potentially do to the current financial divide between these generations in the coming years?
Predictions by the National Institute of Economic and Social Research (NIESR) expect disposable incomes to fall as a result of the UK’s decision to leave the European Union. With a possible rise in inflation come a weaker economy, and salaries and incomes are expected to have to take the fall for it. Not only that, but the NIESR’s predictions also expect another recession to occur, which could cause the same fall in income as the last recession did.
Again, like the previous contributing factors that have causes a financial divide between generations, it can be expected that if these predictions come to life, the younger generation will most likely see the impact over pensioners.
Of course, we cannot be certain of what is to come due to the Brexit decision, and we will only know for sure once the exit comes in play. If you have any concerns regarding your finances, feel free to get in touch with us and arrange a meeting, to discuss your options and potential impact the future might bring.