What Is Financial Independence? Forbes Advisor UK

Financial independence means different things to different people. But, whatever the definition, the rising cost of living is making it harder to achieve.

Forbes Advisor commissioned a survey asking 2,000 people from across the UK what it means to be truly financially independent. The most common response was receiving no financial help from parents or guardians which almost half (44%) of respondents believed to be an accurate depiction of standing on your own two feet.

Others, however, associate financial independence with key life milestones. Buying a home with a mortgage (40%) and paying household bills (37%) were the second and third most popular definitions from our survey.

Currently seven-in-10 (71%) Brits over the age of 18 consider themselves to be financially independent. But while the figure rises to 77% among those aged over 55, this still indicates that almost a quarter (23%) of this age range rely on external financial support to get by.

Just over half (59%) of those aged 18-34 classify themselves as being financially independent.

When asked at what age financial independence is achievable by, the average response was 29. However, a quarter (25%) dont think it is possible until over the age of 30.

When it comes to life milestones that unlock financial independence, our data shows they are generally thought to be reached between the ages of 20 and 30.

Examples include paying rent at your parents home and having a full time job (age 22), renting your own home and getting a credit card (age 24), and paying off your student loan (aged 29).

However, being financially independent enough to support a family is not percieved to happen until age 31, according to our survey respondents.

The ongoing cost-of-living crisis is pushing the dream of financial independence further into the future for many.

For example, those over the age of 55 started paying rent at their parents homes at an average age of 19. This compares to the younger generations, specifically those between the age of 18 and 34, who either started or expect to start paying rent at their childhood home at age 25.

This illustrates how much harder it can be for todays younger generations to start contributing to family household finances. Rising living costs mean it simply is not feasible until theyve had time to increase their earning potential especially if they are also trying to save for a deposit on a home.

The age disparity at which different generations stopped receiving financial help from their parents demonstrates this further. Respondents aged over 55 were aged 22 on average when they stopped receiving assistance from family. This compares to those aged 18-34 who pull the plug on family financial support three years later at 25.

With the economic environment remaining fragile and uncertain, we asked respondents what the future might look like for the next generation.

More than half (58%) of respondents think the average age for reaching financial independence will be much older than previous generations, with one-in-20 (5%) saying theyll never even reach it.

With home ownership being a popular measure of financial autonomy, many also weighed in on the changes wrought by the housing crisis in relation to the impact on younger generations. A fifth (20%) believe home ownership is something only a minority can achieve and that new measures will need to be used to determine what financial independence really means.

Meanwhile, 15% think home ownership wont be possible without help from family members so wouldnt use it as a valid measure of independence.

Whatever step youre taking towards financial independence, making smart decisions early can help to smooth the journey. The finance experts at Forbes Advisor have put together their top tips for those working towards financial independence.

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What Is Financial Independence? Forbes Advisor UK