Overwhelmed and underpaid: No wonder that young investors love crypto

In this column, I speculated last week about how the volatility of the stock markets could scare younger investors. However, comments from readers between 20 and 30 demanded answers to another investment dilemma.

"Could someone answer how to buy young people in the world and save a house and save for retirement?" Asked 22-year-old Scott Wijayatilake.

chosen by dozens of other readers as a "top comment", he outlined, like his generation with enormous student debts, higher taxes and a financial bubble, which pressed property prices out of reach and drove the equity ratings to a ridiculously expensive level.

add slow wage growth and increasing global inflation, and Scott fears that the traditional 60: 40 portfolio, divided into stocks and bonds, will no longer be sufficient: "How can you build something with such low returns that are similar to assets?"

For many young investors, the answer was to rely on more risky systems.

According to an investigation by the Financial Conduct Authority this week, more than a million adults in the United Kingdom bought risky facilities such as crypto during the pandemic.

In view of limited investment and increasing asset prices, you can recognize the attraction of relying on risky assets in the hope of cracking the jackpot.

crypto, peer-to-peer and the use of trading apps and spread-bed platforms to put at short notice on shares and foreign exchange are closer to gambling than in investing-but in view of the pedestrian returns, young people are trying to take an “everything or”.

Even those who invest more traditionally move up on the risk curve. Michael, an FT commentator in the twenties, has spent the past 18 months to build a technology-based portfolio. That went well at first, but has suffered in the past few months: "I bought a few dips, but the dips came again and again."

Here, too, the long -term view was made more difficult by his two goals to invest both for a house deposit and retirement (note that the average initial buyer deposit is now over £ 57,000 and is more than twice as high as in London). .

Instead of investing in both real estate and retirement, many young professionals choose a goal. The decision as to which priorities should be set is difficult

A risky strategy, but the duration of saving allows cash to be delivered to the increasing inflation. The government tacitly promotes this path with the lifetime Isa, which offers a 25 percent bonus on saved or money invested in a first-time property (pay attention to the upper real estate price limit of £ 450,000).

Instead of investing in both real estate and retirement, many young professionals choose a goal. It is difficult to decide which priorities should be set, but at least they have the choice. For many young workers with lower incomes, this may be none of the two, since the cost of living continues to decrease.

The latest decision to freeze the repayment threshold for student loans at £ 27, graduates will cost an additional £ 110 per year in England and Wales, in addition to the increases in social security.

There was no word of officials about when the connection with the income could be restored. Due to the functioning of the system, an estimated three quarters of the university graduates will never completely repay their debts. Instead, you pay an additional tax of 9 percent on everything you earn over the threshold for 30 years until your loans are written off.

For graduates who are property taxpayers, every pound that you earn above this frozen threshold from April will taxed with 42.25 percent (income tax of 20 pence, social security of 13.25 pence and another 9 pence for repayment of the loan).

For those who can afford to get to the real estate leaders (most with parental help), the rise of the 40-year mortgage is another generation change.

Mattcan, an FT reader at the beginning of 30, confessed that he had skimmed down the returns of the index trackers in his Isa and used them to overpay his residential building loan. He took criticism for this risk -free strategy, but the increase in interest rates this week reminds us that the era of cheap money cannot last forever.

The financial juggling act is further difficult by the high costs for the establishment of a family (note that half of the women in England and Wales have no children at the age of 30).

ft reader Tench finds it impossible to save anything since he has children: "The daycare fees consume most of the available/investable income.. Our retirement seems to be a ridiculous dream."

recent research results of the Institute for Fiscal Studies give rise to hope and indicate that those who reduce retirement provision in their 30s, but contribute 15 to 25 percent of the salary in their 40s and 50s, could achieve the same result.

A juicy sum, but the IFS reasons for higher salaries and the drop in childcare costs make it possible. Since study loan debts are written off after 30 years, university graduates could be made in early 50s to save 9 percent of their salary in a pension instead.

The constant fumbling in regulations on pension and the BAföG system, however, impossible for young people to plan planning security.

There is no guarantee that the 30th anniversary limit will not be extended in the future. In addition, readers who deal with the nightmare of the annual reduction of the allowance (which gradually reduce what better earners can save for a pension are gradually reduced from £ 40,000 per year), over the idea of ​​increasing their contributions in later life.

And if your employer contributions to old-age provision are more generous than the basic values ​​assumed in the IFS study, you could flinch if you leave this money on the table. Do not forget that pensions are a valuable source of tax relief - and this also includes the “graduate tax” of student loans.

At the moment, only the best earners will remove their entire study loans within 30 years. Graduates with lower incomes who take a career break or work part -time while starting a family do this much less often - and the IFS makes an important point for you.

If your employer offers "salary waiver" regulations, you have an additional incentive to save in retirement. Since this leads to a reduction in your gross income, the amount is also reduced, which is cut off by these 9 percent repayments of the student loan. In the words of the IFS, this is "analogous to reducing your entire lifelong tax liability".

As helpful as these suggestions for some young readers may be, the greater increasing gap between the generations means for most of them that it fusages the edges - but this type of "leveling" is not on the political agenda.

I leave the last word to the 22-year-old Scott. "Hope young people just hope for the legacy or just don't think about it? I bet on the latter."

Claer Barrett is the consumer editor of the FT: claer.barrett@ft.com ; Twitter @Clearb ; Instagram @Clearb