How much your spending on ‘nice-to-haves’ is really costing you

Millennials and Gen Z have long complained they’ve been locked out of the property market by soaring prices – and now by the mortgage crisis.

There’s no denying these groups face added economic challenges. With the cost of living front of mind, many are back under their parents’ roof, while those living away from home are faced with extortionate rent.

And yet young people are also big spenders.

According to rewards credit card Yonder, in the last 30 days, the average discretionary spend by members aged 30 and under totalled £1,470.

Granted, this may not be a full representation of people in this age group, but based on these findings, it appears that some people are parting with a pretty hefty sum of money on things other than necessary expenses such as rent, utility bills and transport.

Perhaps being told they will never make it onto the housing ladder has made some younger people embrace a “Yolo” – you only live once – attitude, but it doesn’t take a mathematical genius to see that over a year, a monthly “discretionary spend” of almost £1,500 can soon add up. In fact, it tots up to a whopping annual figure of almost £18,000.

Use our calculator, below, to see how much you’re frittering away – and how it adds up over time. 

Research from audience insights company, GWI, found Gen Z (roughly those born since 1997) and millennials are 51pc more likely than the average UK consumer to make impulse purchases online at least every two to three weeks.

Mahmoud Shammout, head of research and insights at TikTok for Business, said: “Our findings show 62pc of online shoppers make an impulse purchase at least once a month, rising to 70pc among TikTok users.”

Is it the case that young people complain about not being able to take the first step onto the property ladder, yet don’t want to make any sacrifice in order to do so?

Coffees, brunches, a gym membership and Netflix subscription are all nice-to-haves. But if you really are set on owning a home of your own, the reality is, something has to give.

Young people may have hit back on social media, with TikTok phenomena, such as “girl math”, rising in popularity. This trend sees posters justifying, tongues firmly in cheek, how reckless purchases are “paid for” by cutting back elsewhere when in reality the sums don’t add up.

The focus is on living in the now and prioritising “experiences” – such as eating out, takeaways, days out, flights and holidays – stemming from the view that home ownership is just too far away to even attempt. But while this trend may help ease the guilt of being susceptible to spontaneous or unbudgeted purchases, it acts as a convenient distraction from the fact that stepping onto the bottom rung might not actually be as far away as people think.

Figures from Lloyds, Britain’s biggest bank, show that the average deposit used by first-time buyers to get on the housing ladder last year was £62,470.

Note though, that this £62,470 average is significantly skewed by London, which required just over £125,000 on average. The good news is that the amount that most first-time buyers across the country need will be significantly lower. In the North East, for example, the figure stands at just under £31,000.

Separate findings from Saffron Building Society show a quarter of 18-to-34-year-olds save less than £100 per month, while more than a quarter of those aged 35-55 save more than £1,000. Saffron’s Kelly Bixby said: “Saving during a cost-of-living crisis can feel like a big challenge, and for some, it may not be a viable option at all. But we actively encourage young people, where possible, to save little and often. Those small pots of money can really add up over time.”

Let’s say, your discretionary spend is £1,500 a month. If you could squirrel two thirds of that amount – a sum of £1,000 a month – into a savings account instead, after just one year there would be a very healthy pot of £12,000.

It would then take five years to amass the £60,000 needed for the average first-time buyer deposit. With house prices gradually falling and savings rates at their highest for some time, you should be able to get there even more quickly.

Part of the problem is that many of us don’t realise just how much we are wasting. Our calculator adds up how much is being spent on non-essentials, and how much you could save over ten years. A typical example shows how easy it is for the pounds to rack up.

• £60 a month on Starbucks coffees
• £480 a month on shop-bought work lunches
• £120 a month on a cleaner
• £150 on takeaways
• £40 on brunches
• £25 on health and beauty treatments
• £40 on streaming subscriptions
• £300 on dinner and nights out
• £2,000 a year on holidays

Total: £1,909 a month
Over 10 years: £229,134

The example above is more typical of a higher earner, regularly working in an office. But, even if you’re a Millennial or Gen Z with a much lower discretionary spend, the same principle still applies: cutting back and putting that money into savings pays off.

Let’s do the sums based on separate findings from Topcashback, a money saving site, which put the average monthly discretionary spend for someone aged between 18 and 24 at £837 a month. Slotting away two thirds of this amount a month would see £558 going into a savings account. After a year, there would still be a very decent pot amounting to almost £7,000.

Admittedly, it would then take you nine years to reach the average deposit of £62,470, but only four-and-a-half years to reach the £30,198 needed for a deposit in the north east – so it still makes very good sense.

In today’s economic conditions, there’s no escaping the fact that getting onto the property ladder is, for many different reasons, no mean feat. Soaring mortgage rates are becoming a bigger problem. The result is that buyers will likely have to stump up bigger deposits to offset the lower amounts banks will lend.

For some, there’s not the luxury of being able to make the choice to cut back on the nice-to-haves, as there just isn’t enough cash to pay for the essentials. New analysis of the cost-of-living crisis by the Open Data Institute shows under-25s consistently score higher on many poverty indicators than other age groups.

That said, for those under-30s who do have money to spend on non-essentials, there is a risk that some will end up sticking to the narrative that home ownership is out of reach – which, in turn, could lead them to abandoning their financial goals completely.