Generation Broke: How the Cash ISA Squeeze Threatens Young Savers and Building Societies Alike

The government's assault on Cash ISA limits isn't just an existential threat to building societies, it's an economic mugging of the generation that can least afford it. Whilst Treasury officials plot to redirect billions into equity markets, they've apparently forgotten to check what life actually looks like for the young people they're supposedly claiming to help. 

The average amount of savings for ages 18-24 is £4,759, whilst the average for ages 25-34 is £9,357, according to Moneyfarm. These aren't the savings balances of a generation hoarding cash in tax-advantaged wrappers. These are the emergency funds of people desperately trying to stay afloat in an economy that has systematically stacked the deck against them. 

The Financial Gauntlet Facing Young Britain 

Student debt alone tells a damning story. The average debt among borrowers who finished their course in 2024 was £53,000 when they first became liable to repay, compared to Millennials who faced maximum fees of £3,000 per year versus the £9,250 annual fees experienced by Gen Z. 

This isn't just a number on a balance sheet. It's a £500-per-month anchor around the neck of a generation trying to save for a house deposit. Full-time undergraduate students starting in the 2024/25 academic year are forecast to borrow on average £44,690 over the course of their studies. Every pound they manage to squirrel away into a Cash ISA represents a genuine achievement against horrifying odds. 

Then there's "rentflation," the government's preferred euphemism for making housing unaffordable. 58% of renters say their rent has increased in the last 12 months, with Gen Z reporting an average increase of £134.70 per month, the equivalent of £1,616 a year. In England, renters on the median household income could expect to spend 36.3% of their income on an average-priced rented home, well above the 30% affordability threshold. 

A quarter of 18-35-year-olds have less than £500 saved, and nearly half say they rely on bonuses or gifts to grow their savings pot. So when Rachel Reeves suggests cutting their Cash ISA limits to "encourage investment," what she's really proposing is forcing people with £4,759 in savings and £134-per-month rent increases to take equity risk with money they may need next month. 

Here's where the government's plan becomes truly delusional. They believe slashing Cash ISA limits will drive young savers toward stocks and shares. The evidence suggests otherwise. 

Digital banks like Monzo, Starling and Revolut have expanded their market share from 16% in 2018 to 50% in 2024. Gen Z (aged 18-25) are the demographic most likely to be eyeing up challenger banks, with 59% saying they are 'potentially' or 'seriously' considering a new account. 

Young people aren't choosing Monzo's coral cards over building societies because they don't understand finance. They're choosing them because neo-banks offer instant notifications, spending insights, and built-in budgeting tools. 54% of respondents said they wanted to sign up because the accounts were easy to use. 

Monzo's budgeting tools and transparent fees have made it popular with Gen Z customers. When you're living payday to payday with £4,759 in savings, you need tools that help you survive, not investment platforms encouraging risks you can't afford. 

Collateral Damage 

Less than 24% of Generation Z and millennials have a cash ISA, compared with 45% of Baby Boomers, according to the Nationwide Building Society. One in ten people aged 18-34 don't know the difference between a current account and savings account, while a third have either never heard of an ISA or didn't understand what it was. 

This is building societies' existential crisis distilled. Young people don't have Cash ISAs because they're drawn to platforms that speak their language and don't make them feel like failures for having £4,759 instead of £20,000. 

Building societies possess just 32% of market share overall, dropping to just 24% amongst 18-34 year olds. Meanwhile, neo-banks are capturing hearts and deposits with digital experiences that make saving feel achievable rather than aspirational. 

The tragic irony is that building societies desperately need young savers. Building societies attracted £14.6 billion in cash savings during the six months to September 2024, according to the Building Society Association, but that growth comes overwhelmingly from older cohorts. When those savers die or spend down their wealth, building societies face a demographic cliff. 

Cut Cash ISA limits and building societies don't just lose £190 billion in immediate funding. They lose any chance to build relationships with the generation that will define banking for the next 40 years. 

Between January and March 2025, more than three-quarters of Gen Z and seven in ten Millennials opened or began using a new savings or investment product. Young people want to save and invest. They're not financially irresponsible, they're financially squeezed. 

69% of 18-24-year-olds say they create a budget for their finances, contrasting with just 42% of those aged 65 and older, according to NatWest Group. This generation is more financially engaged than their grandparents, not less. 

What they need isn't to be strongarmed into equity markets. They need accessible, flexible cash savings that accommodate life circumstances where £134 monthly rent increases can devastate a budget. 

The government should be asking why nearly two-thirds of Gen Z renters say they would find it impossible to buy a home without an inheritance, according to Landlord Today. They should be addressing why student debt, rental costs, and stagnant wages have created a generation with average savings of less than £10,000 by their mid-30s. 

Instead, they're proposing to solve a non-existent problem - young people having too much accessible cash - by pushing emergency funds into volatile markets whilst starving building societies of deposits they need for mortgage lending. 

For building societies, this is checkmate played in slow motion. Lose the Cash ISA battle and you lose £190 billion in funding that makes your mortgage lending viable. Fail to win over Gen Z and Millennials now, and you lose the next 40 years of potential members to neo-banks who've already figured out how to make banking feel human, immediate, and relevant. 

The mutual model isn't dead. But it will be if building societies continue to be seen as stuffy relics whilst Monzo and Revolut capture 50% market share by actually understanding what young people's financial lives look like. 

The government's Cash ISA cut won't create a generation of investors. It will create a generation of young people with even less financial security, fewer paths to homeownership, and a permanent distrust of institutions that claim to have their interests at heart whilst systematically making their lives harder. 

And for building societies? It will mark the beginning of a long, slow decline into irrelevance, remembered fondly by Baby Boomers as the final cohort who understood what made mutuals special. The generation that actually needs them most will have long since moved on to platforms designed for how they actually live, not how policymakers wish they did. 

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