The 2012 National Savings and Debt Barometer, shows that Gen Y are not as financially irresponsible as is often touted by media and older generations. In fact, while others may slam this generation for being fickle, the research shows that this quality works in their favour as they search and find the best rates and deals on financial products online.

The survey revealed that, of all the generations, Gen Y is making the most of their savings with 44% using a high interest savings account, compared to 37% of Gen X and 38% of Boomers – which means they can grow their savings faster. This generation is also better at managing their money with 69% having a preference for budgeting (compared to 64% of Gen X and 62% of Boomers). Forty one per cent say they have a long term financial plan (vs 37% of Gen X, and close behind Boomers at 46%).

RaboDirect spokesperson, Renee Amor, said the online savings bank wants to congratulate Gen Y and encourage them to continue on this positive path.

“We want to stand up on behalf of Gen Y and challenge the negative stereotype often linked to this younger age group. Gen Ys are too often beaten-up over their financial outlook and actions, yet our survey findings contradict these unfavourable perceptions. Gen Ys are taking control of their finances and have a prudent approach to managing spending and saving. Not coincidentally, Gen Y also report higher level of health and happiness,” Ms Amor said.

“Perhaps Gen Y could teach the older generations a thing or two about saving – as our research shows, they saved more this year than the other generations – and importantly they are saving into the right products. While Gen X and Baby Boomers still appear to be married to transaction accounts with zero-to-low interest, the younger generation understand that by using true high interest savings accounts, they are able to grow their savings quicker and enjoy the benefits of compound interest.

“As in most situations, there is still room for improvement and we encourage Gen Y to look for other positive ways to progress their financial situation. One area we would mark as one for Gen Y to keep an eye on is their debt levels. This generation said they feel in control of their debt and are able to manage it, which is great news; however their debt levels are increasing. Being too comfortable with debt can lead to problems, so where possible, pay down debt and resist using that credit card.”

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In fact, according to research conducted by Cameron Research Group, Gen YBOs are quite dependent on these relationships to determine their business insurance needs through the value of advice.

Mr Philip Kewin, Zurich General Manager Sales and Marketing, Retail Risk, said “These findings highlight the importance young business owners place on having a relationship with an expert.”

“Clearly those young business owners who are thinking about insurance want to get the appropriate advice to ensure they have the right type and amount of insurance cover”, Mr Kewin said.

According to the research, the key reasons why Gen YBOs shy away from buying their business insurance online include:

• Business insurance is seen as being complex, particularly by those running a larger business
• Gen YBOs are time-poor and don’t have the time (or interest) to learn about insurance so they think it is best to leave it to the experts
• Gen YBOs are keen to outsource whatever they can in running their business. Business insurance is a category that falls into this behaviour
• They are believers in ‘bundles’ and ‘one-stop-shops’. Brokers perform such a service.

The average Gen YBO is typically optimistic and may not always see the need to pay now for what he or she sees as an “unlikely” future event.
According to Mr Kewin, “They have a ‘get it when I need it’ mentality, which means they need to be made aware of the importance of having insurance early on.”

Even when Gen YBOs do consider and take action with their insurance needs, they don’t want to manage any of the detail themselves. As long as they know the cover is there and it’s right for them, they’re happy.

“Gen YBOs, like many SME owners are extremely dedicated to their business. They don’t want to risk doing their own insurance in case they buy the wrong cover and end up losing their business because they ticked the wrong box.”

So the good news is once they are aware of the need for insurance, they are keen to establish a relationship with a trusted adviser who gets to know the business and takes care of the risk process for them. They are also likely to maintain that relationship throughout the longer-term life of the business.”

*Survey conducted by Cameron Research Group Pty Ltd (Insurance and the Gen Y Business Owner, 2011)

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Despite the hard reality of dwindling superannuation balances and an uncertain market outlook, the survey has found that one in five Baby Boomers are still expecting to assist their ‘Kidults’ in purchasing their first homes. At the same time, more than a third of Gen Y (35%) say they can’t afford to buy a house without assistance from their parents – highlighting a significant disconnect between the expectations and needs of the respective generations. 

The current drop-off in investment in first homes only serves to add to this uncertain picture. The latest household data shows a decrease in first home buyers since May this year, with the total value of dwelling finance commitments falling 1.4%. While some banks cut fixed-interest mortgage rates yesterday, only time will tell whether this will draw more people into the property market.

Against this backdrop, RaboDirect is keen to highlight that people should properly consider their financial situation before taking on a mortgage. RaboDirect General Manager, Greg McAweeney, said: “With news of sharemarkets tumbling globally, Aussies are rightfully anxious about the stability of their superannuation. Baby Boomers have enough to be worried about without added concerns about dipping into their super to help their kids buy their first home.

“With the first of the Baby Boomers reaching 65 this year and many of them moving into retirement there’s likely to be increasing pressure on parents to dip into their retirement savings to fund their ‘Kidults’ first home. Our concern here is that making such a commitment in an unstable economic environment may simply drive each generation further into debt.

“RaboDirect is urging all generations to think twice before jumping head first into such significant debt, no matter how noble the intention. This is a growing issue and we urge parents and their children to get it into the open and discuss options, and expectations, fully and frankly. If you can’t afford the mortgage, whether you are the parent digging deep in your pocket or as the child you have your hand out for help, consider your options and be realistic about your finances. It could be far more worthwhile for example putting your savings in a high-interest bearing account where you will see your money grow faster. You may not need to borrow from your parents in the end, or need to borrow less, and you will certainly have a deposit faster than you would otherwise. As parents, our gut instinct is to help our children whenever we can but this must be balanced with not jeopardising their own secure retirement.”

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