Why Gen Y Are Going Broke

They’re ambitious, demanding and they question everything. Generation Y have hit the workforce whether we like it or not and they are out to change the world.

To understand Generation Y, you have to understand their baby boomer parents. Parents of Generation Y grew up in an era when, to succeed, you had to work hard and there was never quite enough money to go around. They wanted a much better life for their own children. Hence, Generation Y have been pampered, nurtured and given everything they need and more for a comfortable life. They are not used to doing without. They don’t know the meaning of struggle and hardship. Dripping with fashion accessories such as iPhones and laptops, they are leaving university in debt and with a burning desire to live it up now that they are earning. You can’t fool them with money – they know exactly what they are worth in salary and they expect it to be a high number to support their lifestyle and pay off their debt. With information at their fingertips, they are highly productive – they know how to work smarter, not harder – but they are broke.

Generation Y are impatient. They have to have the lifestyle of their dreams now, not later. They are saddled with debt, so why not add more? While they are technologically savvy, they are financially illiterate. The education system hasn’t kept pace with the increasing complexity of financial products and the easy availability of consumer debt. Low savings, high spending and a lack of understanding of the consequences of being in debt mean that Generation Y may go from broke to even broker.

With the right financial education, Generation Y have all it takes to become wealthy. Their potential lies in using technology to find themselves the best deals for spending, saving and investing. The world is at their fingertips; they will search out cheap buys on eBay and find opportunities for making money anywhere in the globe. Expect Generation Y to do all their banking online, switching debt to where it costs them less and savings to where they earn more, with little regard for loyalty to any particular financial institution. Armed with information, they can choose to become powerful arbitrageurs and negotiators (brokers rather than broke!).

It’s encouraging to see that around 20 percent of KiwiSaver members are under the age of 25. While many of these will be young children whose parents have signed them up, a good proportion are Generation Y, who have seen that their ambitions of wealth are best met by starting to save sooner rather than later. Expect to see Generation Y asking questions about where their money is being invested and seeking out socially responsible investments. Despite their egocentricity, Generation Y want to preserve the environment and protect human and animal rights. If they can curb their debt, channel their ambition and become financially savvy,

Generation Y has the potential to create as much wealth as they desire.
By Liz Koh