The pandemic has made Thomas Jepsen, 29, believe saving money is pointless. “I used to be very frugal, but my spending habits have come round 180 degrees and I started thinking that we could all be dead in 15 years.” His goals are now for the short term only, based on the fact that he reckons we’ll all be wiped out by a new variant or another pandemic-causing disease in the near future. “I have decided not to have a pension and am budgeting for just 25 years more additional living,” he says. “I’ve upgraded my car, to enjoy the time that we do have.”
Yikes. Thomas’s take on personal finance might be on the slightly more terrifyingly fatalistic side of the YOLO scale, but he is far from the only young person adopting a fuck-it mindset over his budgeting as a result of Covid. Many are, however, more influenced by the economic and emotional impact the virus has had on a generation already suffering from the impact of the first financial crisis over a decade ago.
“To be blunt, I don’t see what I’m saving for”, says 32-year-old Laila Ali, who has been applying for jobs since February and is frustrated by how competitive the process has become.
During the 2008 recession she moved to the Gulf, where she managed the rare feat for a young Londoner of saving thousands of pounds. But then she came back to the UK a few months before the pandemic and her attitude changed.
“I have been looking to buy a house for a few months now. As a single person, buying a place in London is out of the question,” she says. “I’ve been looking at the Midlands, but even the Midlands has shot up in price sadly and I have been outbid on a number of houses. There’s been such an insane increase in house prices that I don’t think I’ll ever buy my own place. It’s very demoralising.”
Now she is spending like she is “making up for lost time”.
“The retirement age seems so far away and the cost of living seems to be rising each year. I want meaningful experiences now, holidays, regular self-care days and fun experiences with friends and family,” she says. “What’s the point of hoarding money and not enjoying life? After a certain point, it just feels like wasting your good years.”
Ella Ewen, 22, agrees. “My spending habits have definitely changed since Covid for emotional reasons. Especially for my group of friends, we feel like a whole year of our youth has been taken away from us. I’m being more reckless with spending money, especially on nights out, because losing the ability to go out has made me far more aware of how I should be enjoying myself, as you never know what can happen next.”
And like Laila, hopping on the property ladder any time soon feels out of the question. “People aren’t thinking about things like saving for a house, because that seems so far off in life. It’s almost too unattainable to seriously think about.”
Young people were already feeling bleak about their financial prospects before the virus. In 2019, workers in their 30s were still seeing a dent from the 2008 recession on their salaries. If your pay is affected at the beginning of your career, it becomes hard to ever catch up.
Then last year a worse recession hit. “Half of all workers experienced a real-terms pay cut last autumn, with pay growth deteriorating most among those who have been hit hardest by the pandemic – the young, the low-paid and those working in social sectors like hospitality,” says Hannah Slaughter, an economist at the Resolution Foundation. “This is particularly concerning for young workers, as it risks scarring their pay for many years to come.”
Meanwhile, house prices haven’t stopped rising. Over a third of people aged 18 to 24 had their plans to save up for a deposit on a house scuppered by the pandemic. No wonder many have decided they’d rather just forget about it, get on a plane and have a good time.
When estate agency Yopa asked 2,000 would-be first time buyers, 70 per cent of whom had been furloughed, what has become more important for the next five years as a result of the pandemic, just over half stuck to buying a property, while the other half said going on holiday.
“Thanks to the property boom this year, I think I will be saying YOLO a lot,” says Laila. “It’s freeing and depressing at the same time. I’m from an immigrant low-income family, the risks I take in spending my savings are a bit more of a risk than I think most people would be taking. I can’t rely on any inherited wealth, but I think that contributes to my fatalist approach to spending.”
Burying our heads about what our futures hold in order to embrace every opportunity to enjoy ourselves while we can feels like a logical response to the craziness of our times. None of us know if, why or when we’ll need savings, so why sacrifice what little we have? It can be a challenge to set realistic goals.
But if the pandemic has taught us anything it is that the unexpected can happen overnight and financial experts point out that that is likely to mean you need more savings as back up. What happens if you fall ill and are unable to work? What happens if you lose your job and can’t pay your rent?
Debt charities such as StepChange warn that the majority of people they see have become stuck in unmanageable debt as a result of an unexpected life event that they didn’t have any savings for, resulting in them having to take out payday loans or credit cards.
YOLO can also mean we miss out on valuable “free” money, like a workplace pension topped up by an employer, or the benefit of the eighth wonder of the world, according to Einstein, compound interest. The earlier you start saving or investing, the longer you leave it and the less you let your emotions get in the way, the less you have to give up in later life.
Dr Pete Brooks, chief behavioural scientist at Barclays, points out that how much we can or want to save or spend is not always grounded in rationality, but influenced by behavioural biases.
Take the “goal gradient hypothesis”. The closer we get to a goal, the more effort we put into achieving it, like a sprint finish. People tend to start over paying their mortgage a few years away from it being cleared in full, for example. The same applies to savings goals: we save harder when we can see what we’re saving for on the near horizon. So it makes sense that, when retirement or a house to call our own is really far from touching distance, we can feel hopeless and unmotivated.
We also battle present bias. Should I make my unknown future self happier or make the me I know happier now? Especially when the present self fears missing out and is constantly bombarded with pictures of other people in Mykonos infinity pools, looking a lot more relaxed and a lot wealthier.
“I think social media applies another level of financial pressure now for a lot of people and can make people feel very despondent or like they don’t have enough money,” says Natasha Nanner, 32, a self-confessed post-pandemic fuck-it spender. “There is the pressure to be always looking your best – clothes, makeup – be at the fanciest places and go on luxury holidays.
“You have to remember not to get caught up in keeping up appearances and to keep living within your means. This is something that is harder now that we love to constantly keep tabs on what everyone else is doing.”
This toxic combination of a lack of money and a pressure to look successful has also fed into the lockdown obsession for finding alternative sources of money beyond your salary. See the simultaneous explosion of both buy-now-pay-later products like Klarna (the market more than trebled in size during 2020) and interest in investing in riskier assets, like meme stocks and cryptocurrency, in the hope that they’ll make us rich asap. But both are fraught with opportunities to lose a lot, too.
Money coach Catherine Morgan says 90 per cent of our money decisions are based on emotion, not logic. “If you find yourself asking ‘why bother?’ It’s likely that you may need to bring some curiosity to your relationship to money,” she says. “The brain favours decisions that keep us safe. So naturally we dislike uncertainty. Creating elements of certainty for yourself can be hugely empowering.”
She suggests writing a desires list for your future and setting a spending plan with a limit of spending for today, and then spending for three, six and 12 months out. “Start short term then go to town further away. Bring it to life. Create a Pinterest board of inspiration. Save pictures as a screensaver on your phone. Track your progress towards it.” Don’t wait until the end of the month to save what’s left over in your account, set it out upfront and put money aside as soon as you’re paid.
And if in doubt, thrash it out with someone you trust. “If you are making spending decisions on emotions, I guarantee your friend will not have the same emotions at the same time,” says Dr Brooks. “They might not be rational, either, but they might have a more level headed approach in that particular moment”.
Your future self will thank you, though there is always the possibility that a variant will get there first.