Gen X/Y victims of parents success.
The younger generations can become victims of their parents’ success. By this I am referring to the generational changes that have lead us to where we are today and how our lifestyles have changed over the years.
Today's Octogenarians (age 80+) often went without through childhood into adult hood. They were great savers and were most often prudent and practical when it came to paying off debt. They did the hard yards and laid the foundation for the next generation.
The Baby Boomers, the following generation, also went without many luxuries early in life but later got leverage from the efforts of their parents and with the help of economic growth, the start of globalisation and development of new industries, they were set to achieve great things. This was an age where the man was traditionally the bread winner but with the lady of the house also joining the workforce. This increase in household income allowed for debt to be paid off even faster. Post World War II, and again after the Vietnam War, woman became reluctant to drop tools and go back to being a house wife after being having been empowered to become the main breadwinner while their husband joined the War efforts. This resulted in the new standard of duel income families and a better opportunity for them to reduce debts.
Many Baby Boomers are now reaping the rewards of their hard work and forming the “Self-funded Retirees” of today. Of the nearly 500.000 registered super funds in Australia 99% are SMSF's. In fact a bit over 22% of the $1.28 trillion invested in superannuation in Australia is invested through a SMSF (see chart below).
Sourced from Wikipedia
Being in this position financial and either retired or approaching retirement, Baby Boomers are spending accordingly. The children of Baby Boomers are growing up not knowing about real sacrifice, like their parents and grandparents went through. Added to this the price difference, in today’s dollars, for the first home for a Baby Boomer is far less than the cost a Gen X/Y are now facing. Example a house in 1967 would cost you approximately $27,000, nowadays you can expect to pay upwards of $350,000 to $400,000 for something with 30 minute commute to a major city.
Going without to Gen X/Y means not being able to get the new iPad straight away or travelling overseas for a few months rather than 12 or more. There is a sense of entitlement among Gen X/Y, surrounded by disposable luxuries and invitations to treat mean that they must spend or fall behind. Social pressure is a big driver for this, the obvious example of this generational change, any child born after 1990 will never know a work without the internet or mobile phones.
What is needed to avoid kids becoming victims of their parents success….to instil a sense of value and a more pragmatic lifestyle in Gen X/Y’s as well as future generations. They need to be taught that a little bit of sacrifice now means the future becomes more secure.
Failure to rein in spending on lifestyle luxuries and disposable fashion/trends (some not all) will quickly turn into one of those 'if I knew then what I know now' moments merely lying dormant to be realized in the years to come. A stark reality for those who failed to budget/plan years ago that are only now realising they can’t afford to retire and having to work longer.
For those of you who have children need to consider how you plan to educate your kids about managing money/finances, teach them about saving and importantly teach them to live within their means. This is not up to the school system. Don’t be fooled about what kids will learn in school. Your kids will learn how to read, write and count etc. It is the parents’ role to teach them how to apply these skills to their own life.
My own example…
I had my first job at the age of 10 washing cars at a local car dealership in school holidays earning $10 per day (full 8 hour day). The money I made was split 2 ways. I could spend a quarter on whatever I wanted and the remaining three quarters was banked. My parents asked me what is it that I want to save up for and at this age all I wanted was a car of my own one day.
I continued this for a few years and along the way took on some other odd jobs each time keeping some to spend and banking the rest. Often I spent my 1 quarter on Unique Car magazine researching what I would eventually buy with my savings.
By the time I was ready to buy my first car at age 17 I had quite a sum tucked away in the bank. Most parents buy their kids their first car, which to my surprise mine did also. I was surprised that they did this as I was operating under the assumption that I would buy my own can. Due to my disciplined saving over these 7/8 years my parents rewarded me with a 2nd hand Toyota Corolla. A car that remains my favourite to this very day. This money then became what was soon to be my house deposit. Under no illusions that my parents would buy me a house like they did a car, I now had a considerable head start for the deposit.
My cash savings and my car were not the only benefits to come from this exercise….
The other benefit (and I believe the biggest benefit) was that by the time I finished year 12, I had eight year’s worth of work experience, not to mention contacts and references behind me. I knew the value of money and knew all about a hard day’s work. From this I was motivated and more experienced than my peers, many of whom were also seeking work (for many their first ever job). At a time when many other year 12 leavers are also applying for work I stood out from the majority due the experience in the various roles listed on my Curriculum Vitae.
This process or one similar can also be implemented with your own children. There are some very important life skills to be gained from taking on a part time, after school or weekend job.
From my experience it was well worth it. Having worked hard for my pocket money I can tell you I never wasted it…and I still don’t.
