Teenagers would save rather than spend a £5,000 windfall as coronavirus leads to caution

Posted in: Corporate

  • If given £5,000 today, almost eight out of ten teenagers (79%) would choose to save the money.1
  • Saving is followed by purchases like clothes and shoes (71%) or a new mobile (56%) as the main ways to use part of a lump sum.
  • The prospect of this kind of windfall for teens is a reality, as the first child trust funds will mature from 1 September this year.
  • Teenagers can track down their child trust fund via the OneFamily online tool.

If offered £5,000, almost eight out of ten (79%) teenagers said they would put the money into savings – the most popular response given.

This is according to research from financial services provider OneFamily, whose analysis suggests that recent market fluctuations and a drop in consumer confidence caused by Covid-19 seem to be having an impact on teenagers’ attitudes towards saving. As well as being the most common response on what they would do with a windfall, saving was thought to be the most important way to use the money.2.

Purchasing a car also ranked highly on priority³, showing an awareness of the importance of long-term value. Buying clothes and shoes (71%) or gadgets like mobile phones (56%) and laptops (53%) were the next most common choices for how to spend the £5,000.

Being given a lump sum of money is a realistic prospect for many teenagers, since in September the first child trust funds will mature with an average account holding £2,079. These accounts were given to every child born between 1 September 2002 and 1 January 2011, through an initiative set up by the government to give parents a head start in saving for their children’s future.

Apart from the influence of the Covid-19 crisis on the outlook of teenagers, parents are also responsible for a significant part of financial decision-making, with 87% of them encouraging their children to save5. Similarly, 75% of parents proactively teach their children about money6.

This guidance results in 70% of teenagers thinking they know enough about savings to make a good decision, and a further 85% feeling confident that they would spend wisely7.

Another driving factor is ethical considerations, with research showing that almost eight out of ten (78%) would keep the money rather than investing it in a business whose ethos they did not support8.

Jon Lee, Head of Investment Proposition at OneFamily, said:

“This research shows that parents have done a fantastic job in encouraging teenagers to start a lifelong savings habit and that, importantly, their children are listening to them.

“Planning for the future and taking saving money seriously is more important than ever for young people. Covid-19 has affected how everyone is thinking about money, but our research shows that parents will continue to have a significant role to play in educating teens in how to take their first steps into an uncertain financial world.

“With the first child trust funds set to mature in September this year, it is encouraging to see that teenagers are wisely planning to save the proceeds of their accounts rather than spending it all. They’ll be continuing the good work that their parents started when they opened their child trust fund account all those years ago.”

To track down a child trust fund, parents can use OneFamily’s child trust fund tool. To find out more about OneFamily child trust funds visit our OneFamily child trust funds page where parents will find a number of videos and tools.

Unless otherwise stated, all research conducted by Opinium, on behalf of OneFamily, in April 2020 among a sample of 1,000 13-18 year-olds in the UK.

1 Specifically, teenagers surveyed were asked “Imagine you were given £5,000 to use as you saw fit, which of the following would you be most likely to spend it on? Please select your top 5 options.” Given a shortlist of 13 options, 79% included saving in their top 5.
2 Teenagers were given the same shortlist of 13 options on which to spend a theoretical £5,000 windfall, and also asked to rank this top five by importance. Responses were given an average ranking and sorted, with saving coming top (average rank 2.2/5)
3 Using the scoring system in footnote 2 above, putting money towards a car or investing it ranked joint second for importance (average rank 2.6/5)
5 Teenagers were asked how far they agree/disagree with the following statement “My parents encourage me to save up my money”; The figure refers to the net average answer
6 Teenagers were asked how far they agree/disagree with the following statement “My parents thought me about finance”; The figure refers to the net average answer
7 Specifically, teenagers surveyed were asked “Still imagining you were given £5,000 to use as you wanted, how confident/unconfident are you that you know enough about the following options: 1. Saving Money, 2.Spending Money; The figures refer to the net average answer
8 Teenagers were given the following scenario to imagine “You have been given £1,000 and you’ve been given the opportunity to increase it to £2,000 but only if you invest the money in a business that sells things you do not support. What would you do?” and asked to choose one of the following two answers: 1. Keep the £1,000 2. Invest the £1,000 in a business that sells things I do not support – 78% chose the first option