Soaring interest rates, petrol prices, council rates, energy and food costs. That pretty much sums up the current era we are living in. Mortgage owners are tightening their belts, choosing home cooked meals over nights out and shaking their heads at soaring home loan prices, wondering how they would have entered the property market in today’s economy. However, for the Gen Y among us, small credit card debts are their biggest financial woes, as they feed on lavish spending and have little commitments.
Living the good life
According to recent research, generation Y kids are still spending up big, while their parents or older siblings are tightening their financial belts amidst the current period of high interest rates. When you’re struggling to pay the bills, you may find it hard to comprehend how this generation can continue to be so flippant with their credit card spending.
The answer, quite simply, is that Gen Y kids are not affected by many of the same economical factors which are making it hard for others to put food on the table. Generally, Gen Y don’t have a mortgage, and have no debt to speak of, so interest rates do not affect them. Statistics show that 29 percent of young adults aged between 18 to 34 are still living at home with their parents. And their ability to demand higher salaries and better conditions in the work force means there’s more cash to spend on other lifestyle pillars such as entertainment, fashion, sport, travel and music.
Less is more
Gen Ys are less likely to own cars, so petrol has a lesser impact on their potential to spend on luxuries. Likewise, having to pay council rates, energy bills and broadband plans may be completely foreign to Gen Y, as many of them still live at home. And with many of Gen Y studying or working part time jobs, there is more time for social outings, and entertainment.
With this in mind, why shouldn’t they spend up? Without doubt there is nothing wrong with having fun when you’re young, but Gen Y parents would do well to teach their kids the basics of financial literacy. With increased living costs, it is more important than ever for Gen Y to understand that when they get older, they may need to cut back on spending. And if they are wise, they will cut back now and begin saving for that first car or mortgage deposit.
Teaching financial literacy to the current generation is important, and there are a few web sites which are a great place for them to start. CANSTAR offers a learning centre with articles, videos, hints and tips.
RateCity.com.au also features articles, tips on credit cards and offers a free comparison service to help you if you’re shopping around for a new credit card, savings account, term deposit or even a home loan.