Members of generation Y are scrambling to repay education-related debt and putting off buying a home as a result, a REST Industry Super report has shown.
“As the family home has formed a key plank of the retirement savings of many retirees, this lower rate of home ownership suggests that generation Y will need to place increased focus on other retirement saving options, such as superannuation, if they are to have sufficient overall retirement savings,” REST chief executive Damian Hill said.
Hill said the fund had compiled a white paper, which showed 40 per cent of gen Ys had $10,000 to $20,000 in education-related debt.
“This means gen Y is often caught in a juggling act, where they need to get on top of outstanding study debts in addition to making choices about where to spend, save or invest for the future,” he said.
“The HECS (Higher Education Contributions Scheme) system also means that the take-home pay of those in their late 20s and early 30s with a study debt is lower than it would otherwise be. This is potentially a factor in one of the other key findings of the white paper, that generation Y are buying property in lower proportions and at later ages than previous generations.”
REST commissioned the paper, “WealthStyle: Gen Y’s Spending, Saving and Debt Choices”, because much of the fund’s membership is from the generation born in the 1980s and up to about 1993.
Members of gen Y are good savers, with four out of five saying they managed to save money every month.
People aged 31 to 35 were the most likely to be saving, and even 18 to 20 year olds posted a strong result, with more than 70 per cent putting at least a little money away.
However, Hill said the short-term nature of their goals, such as holiday travel, was a worry. Even more worrying was the one in five who said they saved but had no goal.
“With this in mind, it is clear that generation Y could be using the savings they are putting away to make their money work harder for them,” he said.
“Generation Y could benefit from taking a longer-term attitude to savings, particularly retirement savings.”
