Over the last two years a chorus of wealth experts have urged millennials to save money instead of eating out. But such advice doesn’t solve the systemic intergenerational inequality in the UK.
Now Barclays has joined the group, by saying that habits such as annual holidays (planned by 86 per cent of millennials) and nights eating out (54 per cent) could ‘de-rail millennial retirement ambitions’.
British millennials have set themselves ‘an ambitious savings target of over £300K before they retire’, according to Barclays. But millennials who currently put aside £200 a month on average, ‘need to super-charge their saving’, otherwise ‘it will take 125 years to reach their retirement fund target’.
The bank argues that two fifths of millennials fancy going on an annual cruise, which they say would cost £3,500 for a couple. They also argue a third of millennials aspire to eat out twice a week, which they claim would cost £5,946 for a couple per year.
First, it seems unlikely that millennials plan to go on annual cruises which, speaking as a millennial, seem to be an octogenarian activity. Second, if we drill down the cost of eating out they have calculated, we get to £29 per person, per meal, which seems high given that the average curry or Pad Thai costs less than £10.
In any case, the problem with such advice is that it completely misses the issue. It is reminiscent of the property-developer who said if only millennials would stop eating avocado on toast, they could buy a property. As the BBC calculated, for a deposit on a property in London, one would have to cut out 24,499 avocado toasts.
Even if millennials saved the £3,500 they allegedly spend on annual cruises, this sum would be dwarfed by the enormous financial burdens they carry while trying to save for retirement.
While saving for the long-term is sound advice (and the large majority of millennials do save), the reality is that all economic forces are stacked against younger generations.
They are saving for deposits to get onto a housing ladder that is moving further out of reach (house prices in England increased by 5.2 per cent in 2017).
Moreover, millennials pay over half of their income on rent and bills, and are also faced with twice the rate of inflation of older generations.
In addition, millennials are paying off ever increasing student debt.
To actually better millennial retirement prospects: the UK would have to address its housing crisis, lower the cost of higher education, counteract the rising cost of living and create better tax incentives for millennials specifically to save and invest for their retirement.
Until then, the systemic intergenerational inequality in the UK is likely to persist, regardless of whether millennials eat out at restaurants or not.
Originally published in Money Observer on 19 March 2018: http://www.moneyobserver.com/our-analysis/yet-more-unhelpful-advice-millennials