If you’ve ever found yourself sitting at your kitchen table drowning beneath a sea of utility, insurance and credit card bills – tormented by the guilt of that latest online purchase that sits torturously in the corner of the room – we can say with absolute conviction that you are not alone. And we don’t just mean the likelihood that your neighbour is sitting a mere few meters away experiencing the exact same debt-induced anxiety, but the fact that a scene identical to this one has been playing out in kitchens all over Australia for decades.
But what does that tell us – that we’ve learnt nothing at all? That our parents and the generations before us taught us little about how to manage our finances? Give them a little credit – you remember the “don’t do what I did chat”? The disparity can be found in the various mistakes we make as an entire generation, and how we deal with economic challenges that are thrown our way. Let’s take a look.
Baby Boomers – searching for financial stability in retirement
For the Baby Boomer generation – those born between 1946 and 1963 – the thought of an impending retirement might be an apprehensive one. After living through a number of economic shake-ups, many are still smarting from earlier financial choices.
Some bought homes with highly leveraged, high-risk loans because they thought equity would accrue from continuously increasing real estate value. When this failed to happen, many who planned to use home equity as a retirement plan had to look at alternatives.
The arrival of children also threw many female boomers into an all-consuming, domestic lifestyle. For a lot of women, this meant reentering a more advanced job market with dated skills and in some cases that lead to a loss of intellectual capital.
Some consequences of Baby Boomer money mistakes can be seen today. In 2012 CPA Australia produced a report on household savings and retirement that stated, “Superannuation is clearly being used to reduce debt”. They reported that in 2010, the ratio of household debt to superannuation of people aged between 50 and 64 was an alarming 91%.
Generation X – lessons in finance learnt the hard way
There’s no doubt that Generation X have endured some rough economic years. An article by Change Drivers states that 57% of Gen-X Australians now live week to week financially, but many believe this is because they faced the toughest challenges of all.
As young adults in the early 2000s, some of the things Gen X should have been enjoying were a strong income growth, raising young children and even trading up to bigger homes. Instead, the 2007-2008 GFC hit and many had their lives and careers turned upside down.
But suffering the set backs of a worldwide economic downturn during their prime wealth-building years means that Gen-X have had to work hard to recover. Many have taken extra jobs, updated their skills with further education, paid off high interest debts quickly and are more frugal than ever when it comes to living within their means.
Generation Y – on the pursuit of a luxury lifestyle
The Sydney Morning Herald once referred to Generation Y as “demanding” and “unrealistic”.
They have also been accused of prioritising lifestyle over their economic future, which means a lot of discretionary spending – they like to stay up to date with the latest technology and fashion, and have big expectations around lifestyle.
According to a report from Rest Industry Super, 55% of Gen Y households have credit card debt. It also states that, “Personal loans were less common than credit card debt despite this form of finance usually having lower interest rates.”
Many lived at home during their 20s – enjoying parental support during the years when real world spending and expenses should have been experienced. This has led previous generations to deem them “lazy” and “uneducated”.
Retirement still seems a long way off for 18 to 34 year olds and very few are taking an interest in superannuation. Two-thirds of respondents to a REST Industry Super survey said they opted for the default superannuation fund as chosen by their employer. This suggests little interest is being taking in saving and preparing for the future.
Money mistakes vary greatly with each generation. Social values and attitudes change over time and with them – the way we manage and plan our finances. It may be that as generations move forward they become more skeptical about being able to achieve financial success given the seeming fragility of the global economy. That said, perhaps the message we should always keep in mind is that we can’t choose our economy but we can certainly choose how we’ll navigate through it.
This article is written in partnership with People’s Choice Credit Union.
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