Young Aussies focus on income goals over retirement

Younger Australians are more focused on short term financial goals; prioritising managing their income, expenses and savings over retirement planning.

According to the ING My Generation report, 60 per cent of Gen Y – also called Millennials and 66 per cent of Gen Z, their younger peers, cited budgeting and cashflow management as more valuable than holistic advice and retirement planning advice. Even amongst the older Gex X, who are closer to retirement age, 40 per cent were more focused on these shorter-term goals.

Financial planner Adele Martin, whose frim Firefly Wealth has a focus on helping younger clients, says wage stagnation, increasingly variable incomes and the rising costs of living is putting financial pressure on younger generations. This suggests that rather than being short-termist in nature, they simply do not have the means to focus on longer term financial goals.

“We haven't had wage rises in five years, but we've seen other expenses like electricity, private health costs, and home loans increase, so they're definitely feeling the pinch," she says.  

"At the same time, the next generation is not going to have the same job for 30-40 years – they might work part-time or generate income through Airtasker or Airbnb – so they don't necessarily have that regular consistent income.

“They want to feel more in control and that means they need to understand their money and where it goes.”

Q. What advice services do or would you value most highly?

Source: ING My Generation report, which surveyed 1040 Australians between the ages of 22 and 52

Employment and property hurdles

Close to a third of young people are unemployed or underemployed, according to 2014 research by the Foundation for Young Australians cited in the ING report. About 44 per cent of young Australians are in part-time work, up from 16 per cent three decades years ago.  

Escalating property prices, particularly in the major metropolitan cities, have also taken their toll. Young Australians are taking on three times as much debt to buy their first homes than their parents had to, according to the 'Renewing Australia's Promise' report.

Financial advice on the decline

More than half of Generation Y and Z say they would turn to a financial adviser, but also rank their parent, accountants and banks highly as a source of help.  

Generation Y remain very fee conscious when looking for a financial adviser, listing fees as the most important consideration, followed by reputation and qualifications. Personal rapport was not valued highly. 

Modelling from research firm Investment Trends shows that only 1.9 million Australians are actively receiving financial advice from a planner, down from 2.2 million in 2017.  

While face-to-face financial advice remains highly valued across generations, Generation Y and Z – those aged between 16 to 38 years – are more open to receiving advice online or over the phone.

The rise in popularity of robo-advice supports this trend, with Cynthia Loh, VP of digital advice and innovation at Charles Schwab saying: “Robo advice is it makes planning and advice more accessible to more people, one of the most critical issues facing the financial services industry today.

"Consumers want experiences that are both low cost and as easy as ordering an Uber or one-click shopping on Amazon, and the way they invest should be no different."

Younger Australians now rank short-term term goals including travelling, and growing savings, among their most significant financial future goals, nudging home ownership into fifth place, the ING report reveals. Achieving financial independence in the future also ranks highly.