Generation Y and investment
Social researcher Mark McCrindle from McCrindle Research has spent several years researching and reporting on our social demographics and has a lot to say about how each of these generations have made their wealth, and what this might mean for the younger generation.
“Baby boomers have been the boomers in term of their demographics but also the boomers in terms of their economics.”
The Boomers (born between 1946 and 64) make up 25% of the population but own more than 50% of the private wealth, mainly through their investments in an era of rising property prices, McCrindle says.
“They have worked hard and got the return of their labour, they’ve profited very well. They are called the lucky generation.”
Generation X (born 1965 - 79) had some tough lessons to learn, but have come out well, with more diversified investment portfolios than their parents’ generation, McCrindle says.
“Gen X is in many ways the younger brother of the Boomer. They’ve played the game, they got on with it in terms of work ethic, they played by those rules: study hard, work hard show your loyalty and you’ll be rewarded. But the world changed. It’s almost like they turned up to the economic party two hours too late.
“They began their working years with a bit of a HECS debt, they studied longer and therefore began their earning years later than their own parents did, therefore they lacked the financial potency of their parents, in the time of rising asset prices of the 80s.
“They’ve played the stockmarket more - they were shaped when there were more innovative, entrepreneurial opportunities. They are less conservative and you’d say a bit more investment savvy than the Boomers and a bit more open to other options of investment.”
It is the Generation Ys (born 1980 to 1994) that have a bit of a problem with their finances. A report released by the National Centre for Social and Economic Modelling earlier this year found that in 2008 Generation Ys in Australia spent $48 billion on intangible assets - that is, assets with no easily measureable dollar value.
“The Gen Ys we have found a surprising degree of financial illiteracy. They’ve been shaped in this era of the diminishment of the expert - they’re not likely to get financial advice. It’s a DIY world; everything is do-it-yourself. The problem with that is some of the sources of the advice they find online in dubious. There is a financial naivety with Generation Y. You’ve got the worst of both world - they’re optimistic, they have more opportunities to invest but less professional advice and less of the financial conservatism of their parents. For many of them they are an accident waiting to happen.”
Rather than investing in appreciating asset classes, such as property and shares, Generation Y is into experience.
“They’ve invested in their life experience. They focus more on the financial journey rather than the destination in life - it is about the consumption and the experiences rather than the outcome or what you have to show for it. But as far as hard assets go, they’re further behind than any generation have been at any age. They haven’t invested in much.”
McCrindle calls Gen Ys the “safety-net generation” because they live at home for longer, spend more time studying and, until recently, could always find jobs in a tight labour market if they decided they needed extra cash.
“They can end up delaying their financial independence until their 30s or 40s and then they’re stuck in this debt cycle. The solution for many of them will be that their parents will have an estate that will come to them. Others will have to work through the debt cycle which will cause further fragmentation of socioeconomics.”
Does anyone agree that Gen Ys are the wait-for-the-inheritance generation? Or have any suggestions as to how this generation might claw their way back from the debt cycle?
If Baby Boomers made their money on property and X-ers on shares, what appreciating asset class might Gen Ys be yet to make their mark on?
