What are we saving for?
We’re not buying houses, we’re putting off having kids. Yet we’re saving more than ever before. With that in mind, we look at what millennials are doing with their rainy day dollars.
We millennials get something of a bad rep when it comes to finances. We’re a generation of stereotypes, often described as ‘work shy’ or ‘frivolous’ with our finances and more likely to sink our hard earned (or not) dollars into an instagrammable brunch than we are to carefully plan for our futures. (Can I get a collective eye roll please?)
It’s a frustrating generalisation, and one that has been regularly challenged. A recent Suncorp survey showed that millennials are, in fact, amongst Australia’s most savvy savers, putting an average of $533 away every month, amounting to 12.7% of their personal income. Pretty impressive when you consider that’s $100 more than the national average.
And yet, another study by HSBC showed that Australian millennials have the second-lowest rate of home ownership in the world, pipped to the post only by the UAE.
So if we’ve got money in the bank but we’re shying away from traditional investments like property, what are we saving our dollars for?
“Buying a house just doesn’t seem like a priority, given where I am in my life.”
Whilst buying a house might seem like the ultimate savings goal, a recent study by the Australian Institute of Health and Welfare showed that many millennials are deliberately choosing to price themselves out of the housing market in order to live their best lives.
This is certainly true for Hilary, 29, who lives and works in Melbourne’s CBD
“Buying a house is pretty low on the priority list when it comes to saving money to be honest,” she says.
“I’m not married, not even close – so it doesn’t seem like a particularly relevant thing to be saving for. I’ll cross that bridge when I’m ready to settle down. Plus I don’t want to scrimp and save to buy a house in some outer suburb, miles away. I’d rather spend my money on rent; I’m close to work and my friends. It makes sense to me!”
“I’m saving money, my goals are just different than my parents were”
Perhaps it’s perception that’s the problem. We’re certainly spending our money differently to previous generations but is prioritising travel and lifestyle over traditional investments really all that frivolous?
“My parents generation say we’re wasting our money on holidays and going out with friends. I’d just question their use of the word ‘waste’,” says Amanda, 27 and working in marketing.
“For me, travelling and having a full and varied social life is enriching, so how can that be a waste? It’s better for my mental health than saving for a house, I’ll tell you that.”
Contrary to what some may believe, this ‘treat yo’self’ mentality isn’t born out of selfishness or a lack of financial awareness. Indeed, millennials propensity to prioritise saving towards travel experiences or enriching our lives may be more to do with our increased awareness of mental health and the importance of self care. In fact, 94% of all young adults are committed to making personal improvements and are happy to spend money to do it. It seems that instead of investing in real estate, we’re investing in ourselves.
“We’re just more adventurous with our investments”
However, it’s not just holidays and eating out that we’re spending our savings on. A rising number of millennials are getting creative when it comes to growing their nest eggs.
“We’re just more tech savvy these days. We’ve got Google at our fingertips and we’re doing the research to find alternative investments” says Ed, 31.
“We have vastly more access to financial information and many more options. Plus we can invest online so there’s no need to go and see a broker. It’s quicker and easier to experiment with investing our money than it was for our parent’s generation.”
Rather than saving for a family home, some millennials are putting their savings into shares and other products such as peer to peer lending or cryptocurrency.
With a lower barrier to entry, and certain banks advertising online investment accounts that require as little as 20 dollars to get started, it’s no wonder that millennials are more likely to try their hand at investing rather than pursuing the more traditional route of property.
With HSBC finding that it would take the average young person 26 years to save a 20% deposit for a median-priced Sydney house, it’s hardly surprising that millennials are looking elsewhere when it comes to their savings.
“Buying a house feels risky because I’d need to empty out my savings in order to afford a deposit. And if I do that then all my money is tied up in one basket.” says Ed.
“All investments have risks, even real estate. So sinking everything I have into one property just doesn’t make sense to me.”
So when it comes to finances, it seems that millennials are worlds away from the tired, financially unsavvy stereotype often touted by older generations. Rather, Generation Y is navigating a new financial landscape where traditional investments such as property are becoming less appealing than ever before. By taking risks and investing in ourselves, millennials are taking steps towards building a bright future, even if that future looks a little different than it did for our parents generation.