What “Gen” do you fit in to? In this week’s blog, we look at the different generations and their financial habits – and why Gen Y are generally not good at managing their money!

Seniors: This generation was born during and after the First World War. Seniors have never been comfortable with debt, and tend to live a frugal existence. They will turn off lights as they leave the room to save money rather than the planet.

Builders: Born during the Depression and World War II, these people are also known as the ‘Silent Generation’ or the ‘War Babies’. They were used to the concept of a job for life, and feared unemployment as it could result in hunger. The Builders are generally conservative and security conscious.

Baby Boomers: Born into a more prosperous society, the young Baby Boomers were idealistic and keen to change the world. They have a less structured working life than their parents and tend to continue working part-time while semi-retired. Boomers can be more affluent and consumerist than the Builders.

Generation X: This generation was brought up with TV and PCs, and tend to marry late. They are strongly individualistic which could be why they are also referred to as the “Me Generation”.

Generation Y: Offspring of the Baby Boomers, this group can’t live without technology and many have lived a cosy life indulged by their parents. If work doesn’t engage or entertain them quickly, they look for a new challenge. They have a short attention span but are deeply tribal in their friendships.

Generation Z: These children are used to the concept of single and blended families. Often born to older parents, they are growing up faster than previous generations. Exposed to the Global Financial Crisis while young, this generation may develop to become the new conservatives.

Alpha Generation (Gen A): Technologically savvy at a very young age, this generation will begin school at an earlier age and study longer. From smaller families providing less competition at home, these children are expected to be highly materialistic and get they want from financially established parents having more money to spend on them.

Y it needs to change

There is no doubt that Generation Y, the children of the Baby Boomers, is the driver of the next economy. Currently aged in their 20s and early 30s, these people tend to be highly educated, live for today and delay marriage, children or a traditional career, until later in life. And, generally speaking, they are not good money managers.

Who’s to blame? The Baby Boomer generation consisted of children born into families recovering from WWII. This generation was the first to create two-income families and with this extra income these parents tended to indulge their children.

“Gen Y-ers” have been referred to as ‘KIPPERS’ (Kids in Parents’ Pockets Eroding Retirement Savings), with the latest Australian census data showing that nearly a third of young adults are still living with their parents.

Extended education and housing affordability are contributing factors, but it usually comes down to the fact that it’s far cheaper to stay at home with parents covering most of the costs, such as utilities, food and other essentials.

Some of the Y Generation are happy for “Bank Boomer” or “Bank Mum and Dad” to prop up their lifestyles and supplement their income. But this is proving to be the downfall in their becoming successful money managers. Many are heavily in debt, with research indicating that 42% of those under 24 have personal debts of between $10,000 and $30,000.

Having grown up in a largely booming economy, Gen Y is often unrealistically optimistic but it’s getting close to crunch time for this generation. Overly generous Baby Boomer parents are closer to retirement age and are becoming more focused on their own future needs. They either won’t or can’t afford to continue supporting their children’s lifestyles. These young adults need to develop budgeting and debt management skills, build their savings and turn their attention to their future, such as buying a home.

If you’re the parent or the child and the time is looming to make some hard decisions, arrange a time to sit down with us to help you prepare for a different future that works for everyone.

Sources:

White Paper - Seriously Cool: Marketing and communicating with diverse generations – McCrindle Research

4102.0 - Australian Social Trends, April 2013 Released 10/04/2013 “Young Adults: Then and Now” Living arrangements and family life.

www.commbank.com.au “Generation-Y says Y wait” Commonwealth Bank

Salt, B. 2007 ‘Beyond the Baby Boomers: the rise of Generation Y’, KPMG, Sydney

www.news.com.au  Babies born from 2010 to form Generation Alpha

RateCity Consumer Study, August 2014.