The Financial Age Gap: Saving Habits Across the Generations

Planning for retirement isn’t always something that we want to think about, but it’s certainly an issue that requires careful consideration as we begin to get a little older. In the past, retirement was a time when we looked forward to spending lazy days in bed, but today, many are looking at their pension-filled days as a chance to pursue goals, and live the life they’ve always dreamed of, sans work responsibilities.

Of course, to have a good retirement, you need to have a good savings plan in place, and that’s where the problems start. Though in the past, older generations were more likely to save money towards pensions and property, today’s spenders are more interested in using their money on experiences. In a world where Australians are continuing to work longer and harder than ever before, let’s take a look at the saving habits that have changed across the generations.

Introducing the Top Savers: Generation Y

According to research from Suncorp Bank, Generation Y are showing previous generations how it’s done when it comes to savings. These youngsters have established themselves as the savviest savers in Australia, overtaking Baby Boomers and Generation X by a wide margin. The report found that, on average, Generation Y youngsters are saving around 12.7% of their personal income every month. That’s around $100 more than the average of 11.5%.Saving Habits

By now, Generation Y have reached the age bracket of 25-34, which means that they have enough income for saving and investing, without a huge amount of financial commitments. Though Generation Y are known as the “self-entitled” generation, with 1 in 4 still living at home up to the age of 34, this could by why they’re also Australia’s best savers. Staying with mom and dad means that young adults get more time to find a job after graduation.

What do Younger Consumers Save for?

In the past, the greatest focus on savings was all about property. Generation X and Baby Boomers focused on placing their finances into investments and real estate, whereas these days, Australia’s generation Y would prefer to save their money for a vacation than a home. The survey by Suncorp found that 32% of younger savers were looking towards a vacation, while only 24% were interested in buying property.

However, this doesn’t mean that the younger generation has given up on investment completely. A report by Commsec found that Generation Y investors are steadily climbing up the ladder in the Australian share market, with around 33% holding shares in 2014, compared to only 15% of 25-34-year-olds having shares back in 1994. In fact, Generation Y investors are getting started with their shares earlier than ever. In 1995, only 1 in 5 customers for shares were under the age of 35, but now more than half of investors are in the younger demographic.

Additionally, although first-home buying is less common among the Generation Y group than it might have been for Generation X, that doesn’t mean that the younger savers are giving up on their Australian dream. Although many are staying at home for longer, surveys have found that around 94% of the students between the ages of 17 and 29 are planning to purchase their first property in the next five years, putting away savings of around $150 a week towards that goal.

How the Generations are Planning for Retirement

Up until recently, Generation X savers, and Baby Boomers focused on earning for their pension through the savings solutions that were given to them. The older generations never really considered the concept of building their own retirement solutions from scratch. However, today, younger savers are beginning to pave their own way towards retirement with Self-managed superannuation funds.

Planning for Retirement

Self-managed super funds are giving younger consumers the chance to access their own definition of financial security in retirement. Unlike other types of super funds on the market, members of an SMSF are also the trustees of their own fund, and this makes SMSFs are popular choice for Australians who want to control their own future.

According to Paul Baggetta, “The goal of an SMSF should be to hold investments that are diversified, so that over time your investments will reward you with capital growth.”

The Australian Tax Office has found that almost 7,000 new SMSFs were created during a three-month period in 2016.

The Savings Generation Gap

Despite the fact that younger savers seem to be more drawn to experiences, and the chance to manage their own future, than previous generations, it seems that they’re some of the savviest savers that Australia has ever seen. When it comes to planning for the future, Generation Y are investing in everything from shares, to Self-managed super funds, and more, while still keeping an eye on real-estate investment, and the occasional vacation.

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