Millennials are facing an above average cost of living due to rental prices and their spending habits, according to new research.
Investment provider Fidelity International’s latest quarterly Generational Inflation Barometer, which identifies the actual cost of living for different age groups across the UK, shows that in the 12 months to June, the annual rate of inflation for those under 30 rose by a third from 0.6% to 0.8%.
The inflation rate, based on the consumer prices index, is 0.5%.
According to Fidelity, if you are part of generation X (age 30-49), a baby boomer (age 50-64) or over-65, your rate is actually 0.4% while over-75s face a rate of 0.3%.
One of the main factors in the rate for millennials being so high is attributed to spending almost a fifth (19%) of their income on rent and bills, more than any other generation.
Fidelity used the ONS annual spending survey, which showed millennials spend on average £115 a week on rent, compared with the overall average of £45.90.
These figures are then applied to the individual inflation rate given to different constituents that make up the inflation basket, such as rents, clothing and food costs.
Essentially the under 30s get hit by spending less on the items that are falling in price and more on those rising, while putting a higher proportion of their income towards rent.
For example, according to the Fidelity research, they spend just 8% of their income on supermarkets where prices of food and soft-drinks are falling, and more on café culture and eating out, at 14%, areas which have seen higher inflation over the last year.
Tom Stevenson, investment director for Personal Investing at Fidelity International, said: “The average inflation rate for the UK stands at 0.5%. But if you look at what lies behind this headline figure, you will find that each age group feels the effect of inflation differently.
“For the last two years it has been young people who have borne the brunt of the rising cost of living. The upward pressure comes largely from their spending on eating out, rent and bills.
“At the same time, they spend less on grocery shopping and eating in, and therefore don’t benefit from the year-on-year drag on inflation which comes from cheaper food prices and non-alcoholic beverages.
“There are signs, however, that the inflation gap between generations is narrowing as increasing costs of healthcare and cultural experiences are starting to put pressure on older generations.”
Eating out can be a costly business as is the coffee culture. These are life style choices and if partying, eating out etc take preference over saving for a deposit on a home these are choices people make.
I agree house prices are high and difficult for many but in days of your you had to save for a house before moving in with a partner because plain and simply YOU COULD NOT RENT (due to the rent act)! Migration has without doubt caused a hike in rent and purchase prices and this is due to Government failure plan for the influx coupled with the current trend to asset strip by selling off council housing (and anything else such as the Land Registry). Had they built council houses (as they did after World War Two) to reflect the population changes the situation would have been less difficult.
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Getting a decent meal, tasty coffee or having a couple of beers with friends should, in theory, have little to no impact on you saving for a deposit. Any forward thinking person will dedicate money to saving and spending according to a pretty rudimentary budget.
The issue is that, in order to save for a deposit nowadays, the lifestyle changes one has to make can have a noticeable impact on quality of life.
Case in point – I’m 25. One of my best friends regularly has to turn down social occasions because he is being bled dry by rent and his unwavering desire to get on the property ladder. Another became a hermit for a year so he could afford a deposit on a tiny one-bed flat. And me… well… I live with my parents and struggle to save more than a couple hundred quid a month.
If I need a deposit of £20,000, by the time I’ll have saved that amount of money, the property that £20,000 will have ballooned in price and that £20,000 will buy me so much less than it would have been worth to me if I could have gone on a holiday or upgraded my car, for example.
We need more houses. So many of my peers (and we’re a well-educated bunch with degrees, may I add) are having to giving up the best years of their lives to plan for a future that isn’t even guaranteed.
/end existential rant!/
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