Young adults today are less likely to have savings to fall back on. With other financial pressures and stagnant wage growth, it’s perhaps unsurprising that the millennial generation is less focussed on putting money away for a rainy day.

But it’s an important step they should be taking.

53% of those aged between 22 and 29 have nothing saved in either a savings account or an Individual Savings Account (ISA), figures from the Office of National Statistics show. The figure has increased from 41% just 10 years ago.

Even among those that do having savings, the average amount falls below the recommended emergency fund.

  • On average, young adults have £1,600 in the bank
  • It’s increased from £900 a decade ago
  • But 40% have less than £1,000

However, the Money Advice Service (MAS) suggests having a minimum of three months’ salary in the bank to fall back on when needed.

There is some good news though. Those in their twenties today have less debt. Excluding student loans, 37% have debt, compared to 49% a decade ago. Of those with debt, the average owed is £1,900.

The findings suggest that while young adults are struggling to put money away for a rainy day, they are taking a responsible approach to handling their finances. Whether it’s a situation you recognise in your own circumstances, or you’re a parent or a grandparent to a millennial, these steps can help young workers get on the right path when it comes to saving.

1. Pay into your savings account first

If savings are just an afterthought, it’s easy for them to be forgotten about. If you’re serious about building up your savings, it needs to be a priority.

That means including your target savings in your budget alongside all the other essential outgoings, such as rent, mortgage repayments or utility bills. Setting up a direct debit to move a portion of your salary immediately into a savings account when you’re paid can help with managing finances. This way you’re not tempted to spend the money on non-essentials and you should be regularly putting money away.

2. Round up your spending

Give your savings a boost throughout the month by rounding up you’re spending. There are several products and accounts that will do this automatically for you, making it easier than ever. Spend £2.89 on a cup of coffee on the way to work, and 11p will be added to your savings account. In your day-to-day spending, it’s a small amount you may not even notice missing. But the round-ups can quickly add up.

You may be surprised by just how much you’re spending on your card too, helping you to identify the areas where you can tighten your belt.

3. Make your savings difficult to access

If you find that you’re regularly dipping into your savings for expenses that aren’t considered emergencies, this one is important.

It can be all too easy to use savings for an impulse purchase with the intention of putting the money back in, only for it be forgotten about. Don’t carry a card to your savings account with you and make it difficult to access. When you do want to withdraw money give yourself some time to think about whether the purchase is really needed. Of course, you want to access it in an emergency or an unexpected bill, that’s what it’s there for after all, but where possible wait until you can afford to make a purchase.

4. Spend in cash

You’ve probably heard this one a thousand times before. But that’s because it really can help you get a grip on your finances and budget.

It’s easy to lose track of what you’ve spent when you’re paying on card, especially when using contactless. Taking money out of the bank and carrying it in cash can help improve you’re budgeting skills and make it easier to keep an eye on what you’re spending.

5. Set personal goals

Don’t have the motivation to save? This is where your personal goals can help you. Having a bigger picture in mind when you’re squirrelling money away gives you that extra bit of encouragement. Whether you’re saving a deposit for your first home or a summer holiday, setting goals can keep you on the right track.

It’s a good idea to build up several different savings account once you’re in the habit of putting money to one side. Having an account for emergencies only alongside ones for short and long-term savings goals can help keep your different priorities in order.

6. Make sure you’re saving with the right products

Saving with the right products can give your money a significant boost and make the habit even more attractive. Small differences in interest rates and bonuses can make a big impact on your overall savings.

For savings that you don’t need access to in the near future, locking your money away for three or five years can mean securing better interest rates. A Lifetime ISA (LISA) can offer you a 25% bonus on contributions if you’re looking to build up a deposit for your first home, helping you to reach your target faster. To open a LISA, you must be aged between 18 and 40, the maximum annual contribution is £4,000. The money held in a LISA can only be withdrawn without a penalty if it’s being used to purchase your first home or after the age of 60.

7. Start looking at the long term

Once you have short and medium-term savings organised, it’s time to start looking at the long term.

If you’re in your twenties and working full-time, it’s likely you’ve been auto-enrolled into a Workplace Pension. While you can opt out of this, it’s not advisable as you would lose valuable employer contributions and tax relief. If you’re taking a long-term view with your savings, you may want to consider increasing your contributions.

Another area to consider is investing. Over the long term, investments typically outperform cash and, as a general rule of thumb, the longer you’re looking to invest, the more risk you can afford to take. For many, a Stocks and Shares ISA is a good place to start when thinking about investing thanks to the £20,000 annual tax-free allowance.

If you’d like to discuss how to improve your financial position over the short, medium and long term with your personal circumstances in mind, please contact us today.

Please note: The value of your investments can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.