Our latest research has shown that, far from being the pampered and profligate generation they are often portrayed as, Generation Y may have some financial lessons for their elders.
The National Savings & Debt Barometer 2012 found that the generation born after the early 1980s are better than their parents or Generation X in managing money, with 69 per cent favouring budgeting compared to 64 per cent for Gen X and 62 per cent of baby boomers, surprised?.
Similarly, Gen Y are maximising their savings, with 44 per cent using a high interest savings account such as those provided by RaboDirect, compared to 38 per cent of boomers and 37 per cent of Gen X.
RaboDirect’s 2012 National Savings and Debt Barometer also found Gen Y to be less likely than their seniors to be experiencing financial difficulties, while 41 per cent have actually increased their savings over the past year.
Meanwhile, Gen X is reportedly carrying more personal debt than any other previous generation at a similar age, while the baby boomers are entering retirement with only half expecting to have enough superannuation for their needs.
RaboDirect’s Renee Amor said Gen Y “could teach the older generations a thing or two about saving”.
“While Gen X and baby boomers still appear to be married to transaction accounts with zero-to-low interest, the younger generation understand that by using true high interest savings accounts, they are able to grow their savings quicker and enjoy the benefits of compound interest.”
‘Blessed for uncertain times’
Social researcher Hugh Mackay has described Gen Y as well-equipped for uncertain economic times compared to previous generations.
”They’re not rushing marriage, they are not rushing parenthood. In the boomer generation the average age of the mother at the birth of the first child was 21 or 22 and today it’s 31, heading towards 32,” he told the Sydney Morning Herald in a recent interview. ”They are not rushing mortgages. In the 25 to 35 age group in the housing market, renters outnumber buyers… and they are not rushing careers. They are prepared to study longer, change courses, have a job, change the job, change the career.”
According to Mackay, Gen Y is better equipped than all generations to handle economic instability, as seen in their reaction to the recent global financial crisis.
The kids are all right
For baby boomers and Gen X, what then are the financial lessons they might learn from today’s youth?
- Be flexible: Don’t expect the economy, your industry or job to remain the same forever, and be prepared to adjust to change.
- Be financially astute: Put your money to work in high interest savings accounts or term deposits, rather than leaving it in lower-paying transaction accounts.
- Plan ahead: Develop a budget and stick to it. Once you know where your money is going, savings will become apparent and financial goals made achievable.
- Live for the now: Gen Y report higher levels of health and happiness than older generations, probably because they are more in control of their finances.
It seems that rather than being unwise when it comes money, Generation Y know more than a thing or two about the ever-changing job market, planning for the future and the usefulness of saving for the future – things that are important for every generation.