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Guest blog: Rising cost of living means under 40's choosing between marriage, home or children

Guest blog by Paul Bridgwater, Head of Product at OneFamily.

Some recent research by OneFamily found that more than two thirds of under 40s are having to choose between marriage, buying a home or having children.

These are the rites of passage that, at one time, felt the usual kind of thing to aim for – get married, settle down and have kids. But in recent years costs have increased so much that a typical adult aged 40 or under will now spend more than twice as much on these life milestones (£360K) than someone aged 55 or over, who spent an average of just £147K when following the same life journey.

Currently, only a third of under 40s have managed to buy a property before reaching the age of 30. Conversely, among those aged 55 plus, almost twice (63%) that proportion were able to buy a home before they reached the same age. For those who are yet to buy a property, six in ten are worried that they might never be able to do so.

So, there’s a sense that there’s been a shift of priorities for the younger generation, who are undoubtedly feeling the cost-of-living crisis, which has been made worse by rising house prices and the uncertainty of the pandemic and its financial fallout. Saving for a house deposit whilst renting is hard enough, but with the rate of inflation outstripping interest rates, any money they hold in cash savings is effectively devaluing too.

According to the research, almost half (43%) of under 40s are choosing to have a child before marriage or before buying a home (44%), while close to three in ten have decided to not have children at all due to the cost. Of those who have decided to become parents, 43% still find it difficult to afford the costs involved with looking after a child without borrowing money. The data also shows that a fifth (20%) have had to ask their family for help with childcare costs.

It’s all very well having these stats, but what does it really mean? Are we seeing a significant shift in expectations and what can the younger generation do to get onto the housing ladder?

I think there is a change happening – it’s been a tough time and we’ve all had to flex our worlds to fit whatever normal we’re waking up to each day. So, it’s no surprise that the routine expectations of earlier generations are flexing too. Two in five have said they’ve had to ask older family members for help and nearly half (46%) have had to compromise on where they want to live to find a more affordable property. There are also some signs that asset-rich but cash-poor relatives are looking at equity release as a means to give their children or grand-children a leg-up onto the housing ladder with 48% of over 50s saying that they’d consider unlocking property wealth to help them¹.

But the surprising result from the research was that just 15% of under 40s have a lifetime ISA (LISA) to save for their first home – despite the account offering a tax-free 25% government bonus of up to £1,000 on savings each year. That’s free money that could offset at least some of the rising costs that are making life so difficult for young adults. LISAs are only part of the solution, but they have the potential to make a big difference in terms of being able to afford a deposit.

LISA providers have been doing all they can to highlight this product and raise understanding of its benefits as a tax-efficient investment. However, I think the 25% penalty for early withdrawal is a disincentive to the take-up of this product because it actually penalises savers rather than simply acting as a means to repay the government bonus that they’ve received. If the penalty were brought back down to 20%, the level it was reduced to during the pandemic, perhaps this would encourage more to use this product and would go some way to improving the life choices available to young adults.

Unless otherwise stated, all research conducted by Opinium, on behalf of OneFamily, between 22nd - 25th February 2022, among a nationally representative sample of 2,000 UK adults

  1. Research conducted by Opinium, on behalf of OneFamily, between 2nd - 8th March 2022, among a nationally representative of the over-50s UK population

The views, opinions and positions expressed within guest blogs are those of the authors and do not necessarily represent those of the BSA.

Posted by Jo Gilham on 11 July 2022