Young face cash crisis

The Institute for Public Policy Research (IPPR) highlighted a "worrying" savings gap between the amount young low earners believe they need and how far their reserves will actually go.

The thinktank warned that with high youth unemployment, young people are "particularly vulnerable" by having so little to fall back on, after carrying out a survey of young people earning less than £21,000.

It said the Government should do more to help them build up their assets and argued that traditional savings methods like Isas are skewed in favour of those who already have wealth.

When asked how long they could make ends meet if they lost their job, more than a quarter of those surveyed said more than one month but less than three months - but 17% said they could only make ends meet for less than a month.

Almost two thirds of 16 to 29-year-olds surveyed aspire to own their own home, but just one in five have £5,000 or more in the bank, a fraction of the 20% deposit regularly demanded by lenders.

Meanwhile, more than four out of 10 low-earning 18 to 21-year-olds and almost half of 22 to 29-year-olds said they have total debts of £5,000 or more.

IPPR chief economist Tony Dolphin said: "This polling shows a huge gap between the extent to which young people on low incomes think they have enough saved for a rainy day and the reality of what they really have in their bank accounts.

"Most financial advisers would recommend that people put aside the equivalent of three months take-home pay for an emergency.

"But our poll suggests that very few young people have the reserves they would need if they were made redundant.

"With over one million young people already unemployed and the Office for Budgetary Responsibility predicting that unemployment will continue to rise in 2012, these young people without savings are particularly vulnerable."

He said the Government should explore ways of encouraging young people on low incomes to build up savings.

Mr Dolphin added: "If we want a savings culture, we will need new ways of spreading wealth and helping young people build up their assets."
The study was carried out among 1,504 adults aged 16 to 29.