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The saving habits of the young

Young people today are often seen as materialistic, living beyond their means and poor at managing their finances. However, a closer analysis reveals the opposite: young people today are careful with money.

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They don't have the best image: older generations often perceive the young as lazy, impatient and presumptuous according to a recent survey by the World Economic Forum.

The reality, however, could not be more different, at least as far as their approach to saving is concerned: today's young people save regularly, have a low level of debt and make provisions at an early stage for their later years. That is the conclusion reached by the most representative studies in Germany, France and Switzerland. The picture that emerges across national and language borders portrays a responsible youth who are careful with their money.

Four out of five young people save
The saving patterns of the young are very similar across the three countries. Four in every five teenagers and young adults (about 80%) save part of their monthly income. There are also parallels in terms of where the money comes from. A regular allowance is the main source of income (especially for the youngest), followed by income from work or an apprenticeship, with part-time or holiday jobs in third place. The main findings from France, Germany and Switzerland are detailed below.

Germany: saving for bigger purchases
Two thirds of young Germans between the ages of 14 and 24 enjoy taking care of their own finances. That was the outcome of the 2015 Youth Survey by the Association of German Banks. The young are keen savers, even if four out of ten surveyed were unsure whether it is really worth saving money in this low interest rate environment. “Given the low interest rates, the really secure returns, from savings for example, don't even offset annual inflation”, confirms Jörg Arnold, CEO of Swiss Life Germany: “That's why it is advisable to consider alternative investment opportunities. You have to incur a certain level of risk these days if you want to make more from your money.”

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“You have to incur a certain level of risk these days if you want to make more from your money.”
Jörg Arnold, CEO Swiss Life Germany
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The average monthly income of teenagers and young people is EUR 472 per month, of which about EUR 131 is put away. That is the conclusion of a survey by Deutsche Bank and equates to a savings ratio of 28%, which is almost three times as high as private households in Germany. Granted, that is also because many young people still live with their parents and therefore spend less on food, rent etc.

Germany’s youth mainly save for bigger purchases - an electronic device, their driving licence, a car or a rainy day. Saving for material goods declines with age as thoughts of financial security come more to the fore: according to the Deutsche Bank survey 13% of 14 to 25-year-olds are already saving for retirement. “I am aware that retirement is still a long way off for young people”, says Arnold, “but it is still worth thinking about and making use of all the time they have on their side.”

Young Germans are very confident about their financial future. Six out of ten Germans surveyed believe their financial situation will improve over the next six months.

France: saving for security
Young French people have an ambivalent attitude to money. This is confirmed by a study conducted by AXA Banque in 2016 covering the 16-24 age group. The people surveyed saw money as a source of pleasure and success on the one hand, and a trigger for stress and trouble on the other. This ambivalence was also expressed in 2007 in a major survey by the Institut pour l’éducation financière du public (Institute for Public Financial Education) (IEFP) covering the 15-20 age group.

“Money makes young people in France nervous”, says Pascale Micoleau-Marcel, head of the IEFP. “They have a strong need for financial security.” According to the survey, over half of the teenagers and young adults surveyed (55%) had a budget. 41% of young people are saving “for later”, 11% “for security” and 38% for a major purchase. Their monthly income averages EUR 232. The survey doesn't reveal how much of that they actually save.

“Money makes young people in France nervous.”
Pascale Micoleau-Marcel, head of the Institute for Public Financial Education.
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Another finding in France was that the proportion of people who find they are short of money increases with age.  That is the opinion of 54% of 19-and-20-year-olds, 46% of 17-and-18-year-olds and 28% of 15-and-16-year-olds.

Switzerland: saving for holidays
The Credit Suisse Youth Barometer, which has regularly surveyed the values and behaviour of the 16-25 age group since 2010, comes to a clear conclusion: “Most young Swiss don't have financial commitments and are careful with their money.”

If they were to receive a CHF 10 000 gift, they would pay the biggest part, about CHF 2500, into a savings account, spend CHF 1500 on a holiday and keep CHF 1200 aside for a rainy day. The number four expenditure item at just under CHF 800 was to save for a house. 83 % say that they would like their own house or apartment one day.

This finding also comes to light in the “Juvenir 3.0”-study by the Jacobs Foundation, which appeared in 2014. It asked young people from 15 to 21 years of age about money. “We found no evidence of the image often portrayed by the media of a debt-burdened youth”, says Alexandra Güntzer of the Jacobs Foundation.

“We found no evidence of the image often portrayed by the media of a debt-burdened youth.”
Alexandra Güntzer, Jacobs Foundation.
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The Juvenir survey indicates that three quarters of respondents want to be independent of their parents (including financially) as early as possible, even if they have to make sacrifices. Almost all respondents (98%) think it’s right to use their own money (whether earned or saved) to do something special.

According to a Longitudinal study by Zurich University (covering 1057 15-22 year olds) young people save an average of CHF 209 per month. Holiday and travel are the main saving goals, in second place comes a driving licence or vehicle with “financial security” for later in third place. As in Germany, 60% of people surveyed are optimistic about the future.

Main deficiency: financial knowledge
One of the main common features of the three countries does, however, give cause for thought: the financial knowledge of the young, also known as financial literacy, leaves a lot to be desired. In Germany, 60% of respondents were unable to explain the concept of return and 40% did not know what inflation is. Swiss youth were no better: only half of them were able to answer questions properly on risk and return. Even the French youth, according to the IEFP study, “seem detached from economics and finance and they find it hard to associate them with their daily life”.

Jörg Arnold finds this worrying: “Knowledge is the key to making well thought-out financial decisions, recognising opportunities, assessing risks accurately – and leading a self-determined life in the future. Finance should really be an obligatory subject in schools.”

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