A new study of 242 Australian youth indicates that Gen Y are headed towards alarming levels of financial and family stress; the release states there’s been a “disturbing increase in Gen Y financial illiteracy and debt”. What does this mean for the future of business?
The Inspire Money Sense Survey – a collaborative initiative driven by social and ethical investment firm Forming Circles in partnership with youth-led social impact consulting firm Impact Leaders – outlines a “concerning epidemic and trajectory” across an entire generation. It reveals that a majority of Gen Y trust banks more than friends and family, with social media ranked least trustworthy. Also, 31 percent of Gen Y are saving nothing, living pay-check to pay-check; and those who earn between $45,000 and $70,000 are three times more likely to experience daily financial stress than those on the lower income bracket of $30,000 to $45,000.
Worse, one in five Australians have zero to limited understanding of financial terms and products; and only 60 percent have considered buying their first home as a key future goal.
The survey suggests the lack of affordable and accessible financial products and services for youth in the Australian market. A greater cause for concern is the fact that the generation of 18 to 34 year olds are about to transition into the next bracket of life where these financial pressures will affect their families and the associated expenses that come with it, and make it even more difficult to enter the first home buyers market.
The results of the survey also points to an increasing trend in contract-based or short-term and unguaranteed employment; and only 14 percent of respondents viewed income insurance as important, meaning that most didn’t understand the need for or benefits of this service and would only last one month if they were to be made redundant.
According to the Australian Bureau of Statistics (September 2013), youth unemployment was high at 17.1 percent and that Australians in their 20s are struggling to find full-time jobs; some are even heading back to university in the hope that postgraduate work will give them the edge in the job market.
“The report stresses that financial illiteracy has produced a generation, moving towards the next stage of life, where financial debt and mismanagement will compound as they look to have families and facilitate the associated costs and pressures. In addition, they will be forced to take on more loans and again add to these financial and family pressures. The reports findings have given us the opportunity for early intervention to ensure this trajectory is managed,” Emily Haigh, Director at Impact Leaders stated in the release.
“The concept of financial exclusion in Australia is neither well-known nor well-understood. In particular a growing number of young Australians are finding it more difficult to achieve their financial objectives, protect themselves from risk and access appropriate and affordable financial products and services,” noted Renata Cooper, founder of Forming Circles.
The 2011 Money Minded Summary report released by RMIT University, Mission Australia and ANZ noted that providing simplified financial education improved at-risk young people’s long-term wellbeing and ability to successfully manage finances.
Sonia Lipski, Director at Impact Leaders also stated in the release that, “There is a need for new financial services and products that educate, assist and encourage young people to improve their financial literacy skills, budgeting and long-term planning by strengthening the connection between product outcomes and financial drivers and also novel payment terms that can assist young people who are struggling with affording their basic living costs with product affordability.”
“The development of relevant financial skills at an early stage empowers young people and will significantly impact their adult lives. Without a collaborative solution soon, from both the corporate and community sectors, the future for our Gen Ys does not look bright and will certainly negatively impact the social fabric of Australia’s young families and professionals in the near future,” added Renata Cooper.
One 26-year-old participant in the survey believes Generation Y has a “cavalier attitude towards money”.
“Being bombarded with advertising spruiking ‘Buy Now, Pay Later’ and ’50 Months with nothing to pay’ only deters the most sceptical of consumers,” the participant said.
What isn’t mentioned in the release is that 30 percent Gen Y enter into an unstable employment climate with $30,000+ of study debt. On top of that, the costs of living have become very high, making it all the more difficult to establish a sustainable financial plan.
In light of these results, it appears Gen Y startups will face greater challenges. Starting a business becomes a lesser feasible option if these conditions persist and innovation can come to a halt. Is financial education really enough of a solution?
Image source: www.generationy.com