The rising cost of living, including a lack of affordable housing, has changed the financial landscape for Australia’s youth.
According to the Young People’s Financial Strategies: Insights from the Australian Youth Barometer report from Monash University, young Australians often defined financial security as being able to afford material needs without worrying about money.
Saving and investing were listed as their main strategies for financial security, but many factors could influence that in a negative way, including paying for housing.
Interviewees said the prospect of living independently, especially paying rent, was a potential threat to their ability to save.
“At the moment, I guess my strategy is just I move (my money) to where I can find the highest interest rate, and I just save as much of my own wages as possible,” a 24-year-old South Australian man said in the report.
The survey, of 500 young Australians aged 18-24, showed those who lived at home with their parents were much more likely to save money than those with other living arrangements.
According to the data, 56.1 per cent of young Australians who lived with their families were able to save often or very often.
In contrast, only 39.5 per cent of those who lived in a share house and 47.4 per cent of those who lived on their own, reported saving with this frequency.
The survey also found that having a permanent job, which provides a secure and steady income, was a prerequisite to being able to work towards financial and life milestones, such as buying a house.
Overall, 58.4 per cent of young Australians who were working for wages or salary reported regularly saving, compared with only 22.5 per cent of those who were looking for a job but had not found one.
A survey participant from NSW said that after securing full-time employment, it was far easier to save for a larger purchase like a home.
“Since I’ve had this job, I’m able to start planning towards things like getting a deposit on a house and buying a car, those kinds of big purchases,” the participant said.
“They are big steps in my life.”
According to the survey, 92.2 per cent of young Australians regularly saved part of their income and 49 per cent did so often or very often.
The high cost of living on the east coast was also highlighted by the fact that, 57.3 per cent of young people in NSW, 49.7 per cent of young Victorians and 46.7 per cent of young Queenslanders reported saving regularly, compared with only 39.3 per cent of young Australians across other states and territories.
In total, one in four young Australians are struggling to keep up with the ever-increasing cost of living, which is now taking a “serious toll” on their mental health.
Across the board, the survey found 25.2 per cent reported experiencing financial difficulties, with only 18.2 per cent never experiencing financial difficulties.
Co-author of the report and director of the Monash Centre for Youth Practice and Education Policy, Professor Lucas Walsh said changes to the financial landscape for young people matter because their financial experiences are deeply interconnected with other aspects of their lives.
“A quarter of young people told us they are struggling with debt, and this was before recent inflationary pressures and rises in the cost of living,” Professor Walsh said.
“Our report shows that this is having a serious effect on their mental health, which we know to be at crisis levels.
“Saving, going into debt, and experiencing financial difficulties do not happen in isolation but are linked to family, housing, work and wellbeing.”
Professor Walsh said young people hag already suffered during the pandemic from the fallout of harsh Government policies.
“They are experiencing major mental ill-health issues and had their education and working lives severely disrupted,” he said.
“We need to ensure they have access to better understanding and education around finances and financial wellbeing.”
The rise of buy now, pay later services (BNPL) was also found to be on the rise with younger people and causing a negative impact on their lives.
Around half of respondents felt BNPL had a negative effect on their financial behaviour, with 76 per cent of those who experienced financial difficulties also likely to use BNPL.
Highlighting the problem with ever-increasing debt levels and rising prices was a survey participant from Victoria that said they didn’t want to spend their whole life just paying things off.
“I want to reach a point in my life where I can have a good number of years to just enjoy the money that I have left, the money that I’ve earned, without having to worry about making repayments or things like that,” the survey participant said.
The study also found living at home helped young people save money and protected them from experiencing financial difficulties with more than half (56.1 per cent) able to save, compared to those who lived in a share-house (39.5 per cent) and those who lived on their own (47.4 per cent)
Notably, more than a third of young people who lived independently experienced financial difficulties often or very often, compared with 22.6 per cent of those who lived in their family home.
Having a job helped young people save money but did not always protect them from experiencing financial difficulties, as noted by 18.4 per cent of respondents who were working for wages or salary but experienced financial difficulties often.
Lead author of the report, Dr Beatriz Gallo Cordoba said we needed to provide better digital financial literacy support to account for these new realities of young people’s financial lives.
“Schools can play a better role in providing all students access to quality and up-to-date financial education, especially those students who lack family support,” Dr Cordoba said.
“This includes basic financial literacy and numeracy and working knowledge of financial products.
“Improving young people’s financial decisions today will benefit Australians tomorrow.”
