It’s long been drilled into young people that university will not only be ‘the time of their life,’ but that it’ll help secure their financial futures. While investing in higher education can open many doors, the cost of doing a degree is rising, both in tuition fees and rent.
Over the last five years, tuition fees have tripled from £3,000, and UK students are now expected to pay up to £9,250 every year. This means that the average student is graduating with up to £44,035 of debt, including maintenance loans, compared to £24,754 before 20121. This also means it could take up to a staggering 24 years to pay back a student loan2.
So, it’s understandable that millennial graduates have started to question whether or not they should have ever gone to university in the first place. In fact, our 2016 Family Finances Report3 revealed that more than one in three (37%) of 18-24 year olds regret going to university given the amount of debt they now have.
Making ends meet
Our report highlighted that millennials struggle to make ends meet on a daily basis at University, so they have to think outside the box and rely on external sources to help them with costs. Students depend on their maintenance loans, but this often isn’t enough to cover all expenses – especially for those wanting to fully immerse themselves in university life. As a result, many undergraduates have no choice but to find alternative means to get by.
Our recent survey on UK parents with children at university revealed that 42% of students work during university holidays, while 43% have a job during term time. Worryingly, 37% of parents felt that their children’s paid work during term time had a negative impact on studies4.
The only other alternative is for parents to offer financial support, which eight out of ten parents choose to do. However, only one in seven parents (14%) said they had saved a fund which would cover all university-related costs.
What does the future hold?
The struggle doesn’t end after graduation. With an increase in the cost of living, on top of hefty student debt, our report showed that on average, 18-35 year olds have only £156 to spare each month. This has resulted in almost half (48%) of young adults relying on the support of their parents.
This low level of disposable income is diminishing confidence in a bright financial future for British millennials. To deal with this, nearly two thirds of this age group (63%) are hoping for a one-off event or a financial miracle to get them back on the straight and narrow.
Reliance on a windfall or one-off event
Winning the lottery
New job/better salary
These millennials can also be referred to as Generation Ostrich, or Gen O. With many admitting that they’re relying on an infrequent or unlikely event to happen, it’s clear that Gen O have their heads in the sand when it comes to thinking about their financial futures.
The odds of winning a National Lottery jackpot are pretty farfetched at 45 million to one5. So it’s more important than ever for Gen O to start taking control of their own spending and saving habits, rather than hoping for one of these rarities to occur.
Looking towards the future
Although university is a major financial commitment, those thinking about going shouldn’t be put off. According to the Department for Business Innovation and Skills, “the employment rate for working age graduates of 87.5% is the highest level seen since the 88.3% recorded in 2007”6. There are significant long term benefits to a degree, you just need to be aware of immediate costs and consistently look ahead financially.
Louise Colley, Aviva Customer Propositions Director, told us that, “while millennials may have to wait a few years to see the benefit of their degree, there are steps they can take to improve their financial situation in the here and now.”
One way to keep your finances on track is to prioritise long-term goals - such as buying a home or getting married - over short-term spending. While 14% of millennials admit spending for the here and now, defining tangible milestones seems to inspire young adults to look towards the future. For example, 44% of millennials say they are hoping to buy a house or flat before their 35th birthday.
Reflecting on results from both our Family Finances Reports and survey, it’s clear that British millennials need to build confidence and gain control of their future prospects. As more and more young adults feel that big assets are too far out of reach, Colley agrees that the “industry and government must also take steps to reduce the gap in financial confidence between young and older people with policies that help those struggling to achieve their goals.”
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Over 2,000 people aged 18-55 who live as part of one six family groups were interviewed to produce the report’s latest tracker findings for Q2 2016, with additional interviews among 18-35s taking the total in this age group to 1,073 for the spotlight on millennials.
Research carried out for Aviva by Censuswide in June 2017. 2,000 UK parents who have children at university or who have been to university in the last 10 years were surveyed online.
Dr John Haigh, emeritus reader in mathematics at the University of Sussex, www.sussex.ac.uk/broadcast/read/30936