Govt must do more to encourage saving, says think tank
A think tank is calling on the Government to come up with ways to encourage young people to save so they can afford to buy a home and put money away for a rainy day.
The left-leaning Institute for Public Policy Research says a “squeezed generation” are saddled with debts and are unable to save meaning few will be able to afford to buy a house, despite over half of all under 30s wanting to do so.
The call comes just months after the Government set out its housing strategy, aimed at boosting house building and helping first time buyers get on the housing ladder.
New polls carried out for the IPPR by YouGov, suggest that although 3.5 million out of six million 16 to 29 year olds believe they will own their own home, around a quarter have no savings at all, making it unlikely they will be able to afford to do so. More than four out of ten 18-21 year olds and almost half of 22-29 year olds earning less than £21,000 a year say they have combined debt of £5,000 or more.
IPPR chief economist Tony Dolphin (pictured) says: “The Government should explore ways of encouraging young people on low incomes to build up savings. If we want a savings culture, we will need new ways of spreading wealth and helping young people build up their assets.”
The think tank says the cancellation of the Savings Gateway and the replacement of the child trust fund with junior Isas means incentives to save for low earners “no longer exist”. In October, the IPPR criticised junior Isas as only benefiting the wealthy who would already be saving.
The IPPR says despite the increasing risk of redundancy, and most advisers recommending people have three months salary tucked away, only a quarter of 18 to 29 year olds could make ends meet for that long if they lost their job. One fifth said their savings would not last a month.
Dolphin says: “This polling also shows a huge gap between young people on low incomes who think they have enough saved for a rainy day and the reality of what they really have in their bank accounts. Most financial advisers would recommend that people put aside the equivalent of three months take-home pay for an emergency. But our poll suggests that very few young people have the reserves they would need if they were made redundant.”