Young people across the UK are making a decisive shift towards bolstering their financial reserves in 2026, driven by the enduring cost of living crisis and looming tax changes. Exclusive new data paints a stark picture of a generation battening down the hatches.
A Generation Forced to Save
According to the latest City AM polling conducted by Freshwater Strategy, over half of all Britons are aiming to save money this year. However, the figure is far more pronounced among the young, with a staggering 70 per cent of 18 to 34 year olds prioritising bulking up their savings pots.
This urgent drive comes as young professionals scramble to offset significant policy changes announced in the Autumn Budget. Key among these is the extension of the income tax threshold freeze until 2031, coupled with a freeze on student loan repayment thresholds. The phenomenon of fiscal drag, where rising wages pull earners into higher tax brackets without any real-terms increase in take-home pay, is set to hit this demographic particularly hard.
With roughly six per cent of the UK's 34 million-strong workforce expected to earn above £100,000 in the next tax year, the freeze undermines career advancement. A significant 51 per cent of young people are looking to climb the corporate ladder, but subsequent pay rises risk being swallowed by the higher tax band.
A Nation Divided by Financial Priorities
The polling highlights a clear generational split in financial goals. For older Millennials and Gen X, paying off debt remains the most pressing concern. Retirees, in contrast, are predominantly looking to use their funds for holidays and travel.
Despite these differing aims, the importance of a rainy day fund is universally acknowledged. Nearly six in ten people aged 35 to 54 are aiming to build one, alongside 35 per cent of those over 55.
Pessimism and Interest Rate Frustration
The push to save is unfolding against a backdrop of deepening economic gloom. Over 70 per cent of people feel pessimistic about the cost of living crisis, with stretched monthly wages going on high-cost essentials like energy, food, and rent.
This financial strain is causing widespread anxiety, with 66 per cent stressed about paying taxes and managing household budgets, and 62 per cent concerned about the overall state of the economy.
Further frustration stems from the Bank of England's interest rate cuts, which have led to thinner margins on savings products like ISAs. Despite this, a cautious attitude persists towards the stock market. Many savers refuse to move their cash into investments, fearing potential losses, even in the face of Treasury measures like a stamp duty holiday for newly listed shares.
Jordan Meyers, head of research at Freshwater Strategy, summarised the mood: “Voters are entering 2026 on the same poor economic footing as last year, with further tax pain expected. It is up to the government to demonstrate that things are beginning to turn around and give Brits reason to be optimistic about the future.”
