They may be thought of as lazy and entitled, but Gen Y have proven to be the nation’s best savers, and the experts say they’re not surprised.
Twenty-nine per cent of Gen Y saves a “regular amount” each month, in contrast to only 19% of Baby Boomers and 25% of Gen X, according to the first instalment of RaboDirect’s 2013 National Savings and Debt Barometer.
Overall, 24% of Australians were able to maintain consistent savings each month.
The number of Gen Ys saving increased to 62% when including those who save inconsistent amounts each month, compared to 54% of Gen X-ers and 51% of Baby Boomers.
Steady saving was viewed by RaboDirect as the best way to achieve financial success, but 31% of Australians were more prone to saving money on occasion, but not managing to put money aside on a monthly basis.
A positive sign from the report was that 95% of people overall managed to save some money, although 5% of Australians still regularly spend more than they earn.
The founder of Wealth Enhancers, Sarah Riegelhuth, 32, told SmartCompany Gen Y is becoming savvier at saving.
“From the GFC… Gen Y realised the heyday of investments was over. We came through high school and into university and at that time the GFC shocked everyone into line,” she says.
“In the past four to five years they’ve started to save. However, what we’re seeing is they’re not taking the next step to invest.”
Riegelhuth says if all your money is left in cash it won’t grow enough to keep up with inflation.
“If you invest all your super, for example, in cash, it’s wasting all the money. You might feel secure, but ultimately there is no growth in cash,” she says.
“People need to get to a point where they have a buffer saved up, say three months income, and then it’s time to start thinking about taking the next step toward investing.”
Riegelhuth says Gen Y tends to be more aware of saving strategies and frequently search for better deals online than their older counterparts.
“We have so much access to information. The amount we have coming at us from all different angles is totally different to what any generation before us has had,” she says.
“We’re a bit more aware, we’re good at researching and finding deals.”
The study also looked into the non-financial benefits of saving, once again finding financial health leads to improved physical and mental wellbeing.
Sixty-two per cent of regular savers reported they felt completely happy with their lives, in contrast to only 19% of non-savers.
Sixty-seven per cent of savers also reported they felt comfortable with their finances – a stark comparison to only 7% of non-savers.
Hillross Wealth Logic financial planner Craig Muchamore told SmartCompany Gen Ys are increasingly willing to give up discretionary spending to prepare for the future.
“They’re willing to give up a lot earlier to get into the right habits… because of things like the GFC and the perceived increased volatility economy,” he says.
“They have the knowledge that in the future they’re going to need more savings. However, this can also be a negative because they think ‘I know my life is going to be hard in 10 years, so I’d better spend now’, which is why 29% is still a relatively low number.”
Muchamore says for people considering starting saving the first thing to do is have a detailed budget including miscellaneous expenses.
“That $50 on food needs to be included, you can’t kid yourself about what you do and don’t spend because it’s all about getting into the right habits,” he says.
“You can even have your employer pay a designation portion of your salary directly into your savings bank account, or alternatively if your employer can’t, your bank can usually do automatic transfers on your pay day. If it’s not there, you can’t spend it.”
Muchamore and Riegelhuth also both recommend having a savings goal.
“Work out what you actually want to achieve and invest and save toward those goals,” Riegelhuth says.
“There’s no point saving for the sake of saving because anytime something comes along you want to buy, the decision to spend the money will be quite easy, but if you’re saving toward something which is important to you you’re much less likely to deviate from the savings plan.”