With inflation continuing to rise in the UK, 1 in 3 (33%) young people are considering a stocks and shares ISA to grow their money over the long-term, according to new research by smart money app Plum.
Putting money into the stock markets was listed as the third most popular reason to save money by Gen Z respondents after saving for a holiday and building an emergency fund, showing a growing investment appetite among under 25s in particular.
The research, conducted by OnePoll of 1,750 millennial and Gen Z adults, also found that riskier investments are gaining momentum with young people. Investing in shares is considered an option by one in four, while cryptocurrency and valuable metals are being explored by around one in five. 17% are even thinking about odds-on sporting events to try to get a better return.
This exploration of adventurous options reflects a growing discontent with high street banks. Many have faced criticism for failing to pass on higher interest rates to customers, despite the Bank of England base rate increasing from 0.75% to 4.25% in just one year.
More than three quarters (78%) said they are fed up with high street banks not passing on higher rates, and two thirds (66%) would switch to a digital-only bank if they were offered a better interest rate.
Victor Trokoudes, founder and CEO of smart money app Plum, comments: “Conventional saving routes are not holding much appeal for today’s young people, which is no surprise when the real rate of interest is at best -7% for an easy-access account.
“Despite the Bank of England increasing the base rate substantially, high street banks have been painfully slow to bring much more interest to their customers. They will lose out in the long run as younger customers are tech savvy and have no qualms about switching to a provider that will offer a better return.
“While tax benefits and the relative straight-forwardness of ISAs make these the most popular investment choice, it’s interesting to see many people exploring other, less established investment options too. Bitcoin, for example, has seen a renewed interest of late, increasing by 20% in value in the last month.”
The research revealed that young people are increasingly using technology as a tool to explore new methods of growing their money. Two thirds (67%) think that new technologies make saving and investing easier to understand. And a similar percentage (65%) believe the amount of financial information available online – in blogs, podcasts and elsewhere – helps them better understand savings and investments.
Where they get their inspiration is increasingly online too as wealthy online financial entrepreneurs are found to be inspirational by a majority of young people, although they have more sway over men than women. While more than two thirds (68%) of men find them inspiring to some degree, the number drops to just one in three (33%) for women.
Despite difficult financial circumstances, the research showed resilience and optimism about the future. Just under two-thirds (65%) believe they are better placed to make their money work hard for them compared to older generations. And nearly half (46%) believe they have the potential to become an ISA millionaire one day.
Victor Trokoudes adds: “Amongst all the doom and gloom in the news it can be easy to forget how much you have to gain when you have most of your life ahead of you. And young people are very well positioned to use convenient financial information available online from regulated organisations to inform their money management choices.
“Taking time to research not only the best savings options available, but the wisest ways of investing, can pay huge dividends. Maybe the dream of being an ISA millionaire isn’t so far off for today’s young people after all.”