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According to Bernard Salt, one of Australia’s leading demographers, there are 3.3 million Gen Ys in Australia. History suggests they’re approaching the age where they are about to start or are in the early stages of what will be a lifetime of debt.
In the book Understanding Y, I discuss the relationship that Gen Y have with their money, and have discovered signs that Gen Y are not the debt-plagued reckless spenders many have labelled them to be.
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Here are three things you need to understand about Gen Y:
1. Mortgage motivation
Despite persistent commentary that Gen Y don’t want to own their own home, it seems Gen Y aren’t as unique as they are often portrayed. If Gen Y aren’t yet mortgage customers, it’s not because they don’t want to own a home, it’s because they can’t afford to.
According to a Westpac report, 87 per cent of females aged 18-34 and 79 per cent of males list owning a home and paying it off as their top lifetime goal. Such a goal is likely to be one they inherited from their parents. The Baby Boomer generation have thus far been incredibly successful in their property investment strategies with big home equity gains experienced throughout the country. Because of their success, Baby Boomers have encouraged their children to do as they did.
Likewise, Gen Y look at their parents, with owner-occupation sitting at around 70 per cent in assets that have strongly appreciated over time. They’ve witnessed their parents benefit from investing in their own homes, thus 75 per cent of Gen Ys believe investing in property will offer them the security it offered their parents and set them up financially for the future, according to Mortgage Choice research.
2. Financial literacy
Unlike their predecessors, Gen Y have been raised in the information age, and as young adults have the gift of unprecedented access to a seemingly infinite source of financial knowledge. Thus Gen Ys are much more informed and educated when it comes to making financial decisions.
According to the recent JP Morgan/Fujitsu Australian Mortgage Industry report, while Baby Boomers and Gen X were found to be much more likely to use the services of a mortgage broker in order to "seek more confirmation of their decisions", members of Gen Y were "typically soloists", and far more likely to use online technologies to interact with their financial services.
3. Consumer behaviours
Despite popular belief, members of Gen Y are generally careful with their spending, with many saving every month, according to the findings from a Rest Superannuation report.
However, it’s worth noting that they are accruing more debt at an earlier age than their predecessors, the majority of which has come from the cost of studying. While they are saving, it is generally for short-term purchases and experiences, not with an eye to the longer term. Research in Australia has proven that Gen Y is not as frivolous about spending as popular perceptions often suggest, although they do face real and difficult financial challenges.
To overcome these challenges, Rest’s report showed that 75 per cent of Gen Ys were willing to make lifestyle changes, including cutting back on day-to-day spending, eating out less and limiting takeaways, missing out on a holiday, delaying vehicle purchasing and cutting back on alcohol-related expenses. Having been raised by debt-adverse Baby Boomers, Gen Y share a similar dread when it comes to being in debt, and have shown a desire to minimise debt where and when possible.
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