Generation 'Y' hooked on credit:

[krisbarry]

Gen Y hooked on credit: report

By Sam Holmes

16sep05

THE post-baby boom generation of consumers accept long-term debt as a lifestyle choice and not just a means of getting a financial leg up, research has found.

And the financial services sector remains behind the eight ball when it comes to meeting the needs of Australia's generations X and Y - those born after 1964.

Social researcher Mark McCrindle said a demographic map divides Australia into three broad generations: "builders" born before the second world war; baby boomers" born between 1946 and 1964 and generations X and Y.

Generation Y in particular - those born in the early 1980s onwards - were likely to be overly dependent on credit for lifestyle.

The builders generation - those pre-war - have quite a structure around spending," Mr McCrindle said.

"They're financially conservative and they like to save and then buy something in force compared with boomers who are a bit more used to credit but at least the boomers are aware of interest rates.

"The generation Y's are credit dependent."

He said in a world of HECS debts, internet purchasing, credit cards and mobile phones, generation Y's financial challenges were vastly different to those of previous generations.

Even buying a home and saving up for the mortgage deposit is a massive commitment compared with the past," he said.

"The Real Estate Institute shows that it used to take 250 weeks of work, today it takes nearly 500 weeks of work."

While much of the credit dependency was a product of a younger generation's tendency towards risk, many of the demographic's financial habits were here to stay, he said.

Mr McCrindle expects life stages such as buying houses and having children to make generation Y slightly more debt averse but he said most of the habits were here to stay.

Most of what we see today has already been formed by their times, eras, social markers and the like," he said.

The concern about this was the financial sectors slow reaction to such trends.

They aren't connecting with gen Y, mainly because gen Y aren't the high net worth individuals - it's the boomers that are," he said.

"But if you extrapolate it out, generation Y will have far more super than any previous generation because they've got super at nine per cent from day one.

"I think financial companies need to start to build some loyalty to Gen Y ... and I think they'll be rewarded in the long term."


Source: http://www.theadvertiser.news.com.au/common/story_page/0,5936,16622117%5E1702,00.html

Any comments on this article? Is it just a sign of the times?

 

[Smurf1976]

Very recently I found out that a 19 y.o. that I know is taking out a home loan. OK so far...

But there is no home! Well, they have a home in that they live with their parents, but they have never bought property and aren't about to. The "home" loan is for hotting up their car which is already 90%+ financed via a personal loan.

It seems that the increased amount they "need" went over some kind of limit for personal loans (?), so the bank just gives them a home loan instead. And THE CAR IS UNINSURED (I know this for a fact).

They just organised some sort of meeting with the bank, went to the meeting and got the loan.

At least now I know why this "big 4" bank paid me practically no interest on deposits (hence I shifted my cash elsewhere) - with lending practices like this they must (hopefully) be making some pretty big allowances for defaults.

 

[bvbfan]

Hmm interesting, it would have to be ANZ, NAB or WBC

Unless the 'lender' doesn't know what they are selling as CBA has no limits on personal loans

Uninsured or uninsurable? My mate has a turbo and costs him about $4000 a year, I'm guessing this persons (tempted to say guys) insurance is prohibitive

 

[Julia]

Very recently I found out that a 19 y.o. that I know is taking out a home loan. OK so far...

But there is no home! Well, they have a home in that they live with their parents, but they have never bought property and aren't about to. The "home" loan is for hotting up their car which is already 90%+ financed via a personal loan.

It seems that the increased amount they "need" went over some kind of limit for personal loans (?), so the bank just gives them a home loan instead. And THE CAR IS UNINSURED (I know this for a fact).

They just organised some sort of meeting with the bank, went to the meeting and got the loan.

At least now I know why this "big 4" bank paid me practically no interest on deposits (hence I shifted my cash elsewhere) - with lending practices like this they must (hopefully) be making some pretty big allowances for defaults.

Hello Smurf

Didn't the 19yo need some sort of collateral for the home loan? Perhaps not. It's a long time since I had a loan and I guess things are easier.
Whatever, that's a scary story. Is the kid likely to be able to pay off the debts in the foreseeable future?
Julia

 

[Smurf1976]

Hmm interesting, it would have to be ANZ, NAB or WBC

Unless the 'lender' doesn't know what they are selling as CBA has no limits on personal loans

Uninsured or uninsurable? My mate has a turbo and costs him about $4000 a year, I'm guessing this persons (tempted to say guys) insurance is prohibitive

Not certain that it was due to exceeding a limit on personal loans, but why else would you have a home loan for a car? What he said to me was that it was "because I need more money than the personal loan". Whether or not it was possible to get a sufficient personal loan I really don't know. I assume the home loan interest would be lower though.

As for insurance, yes the problem is the high cost which, I assume, with the mods would only get higher. Young males, hot cars, you know the story. Too big a risk for me, but obviously not for him. Nice car though.

At least third party insurance for property damage ought to be compulsory IMO. What if he runs in to a $100,000 car?

 

[krisbarry]

I have spoken to a few generation "Y" recently and it doesn't seem to bother them at all being in debt.

Most of them have mobile phone contracts, car loans, credit cards, store cards, large HECS debts etc.

God I couldn't sleep at night worrying about all that debt!

Maybe this generation don't even care about it. Seems to be accepted, the norm.

Times are a changing!

But as stated in the article, generation Y, will have an increadible amount of wealth tied up in super @ the 9% employer contribution rate, for all of their working life to this point now.

 

[tech/a]

Again.

This isnt the fault of the people getting themselves into ridiculous debt.

The blame lies fairly and squarely with their Parents/Teachers/Grandparents/Uncles/Aunts/Coaches.

The second level is greedy lending institutions who have no care about their customers--not only banks but short term money sharks,Pawnbrokers.

Third tier is the legal system.
Take The Care owner above. He hits a $100K vehical loses the court case--cant pay---declares bankruptcy--stuffs his life up and isnt held responsible for his actions. Rather than that he should be made to pay it back NO MATTER HOW LONG---plus the institution dumb enough to allow someone UN INSURED to get a loan----yes he was dishonest--but the lender was also not interested in the truth---so they to should hold at least 50% liability.

There are very few ROLE MODELS
Kids these days dont respect anyone,simply because they havent been in touch with anything worth respecting!!!

Dont blame the kids they know no better---and we who do--I'm including ALL in the groups above as WE---dont give a toss.

 

[krisbarry]

Ahhh but that poses the next question...

The baby-boomer generation are the most wealthiest of all generations ever!

So why then are their off-spring in so much debt?

Generation X started it and now generation Y, thrive in it!

Bad role models you say?

Could be?

So why then have they let their children go so to speak?

OR is it much more than that!

A product of our society....it is almost kewl to be in debt now days.

Saving is not kewl anymore!, says generation Y

OR is it just pure greed of the baby-boomer generation, accelerating prices at such a rapid rate that younger generations simply cannot keep up and then thumb their noses at their parents greed?

Babyboomers say generation Y, want it all now and are not interested in saving, not even for a house. But with so much wealth and greed at the top end of town, doesn't leave much room for younger generations to create much wealth does it?

Who knows?

Just thought I would add a little more fuel to the fire!

 

[tech/a]

Kris.

Dont know that the babyboomers are the wealthiest ever.
In terms of net asset relative to the value of money in the past I dont think it is much different.
Only 5% will retire without gvernment assistance.
Only 10% have an investment property.
Less than 1% have more than 1 and less than 5
Less than 1% of that 1% have more than 5.

Realestate is where most of the wealth comes from.

I doubt that there is a correlation with wealth and commonsence.
I also doubt that there is a correlation between wealth and role models.
Respect is not a given it is earnt--often through admiration.

To suggest that Y generation are getting in debt to spite parents is strange.

Kris I must say that I find your aversion to wealth creation interesting.
When does looking after ones interests in life turn to greed in your view?
When does an entrepenuers pursuit of development and expansion become greed?
How would there be growth of any sort in a democratic society if there werent people that pushed beyond acceptable growth parameters(whatever they are?).

Saving is only the tip of the iceberg.
Its not what or even how much you earn.
Its WHAT YOU DO WITH IT that will determine wealth.

Overdosing on depreciating assets isnt the way to go and many "Y" generation dont understand the mechanics of it all!---Ignorance YES.

The world IS a level playing field---we all have a choice.
Actually let me re phrase that.
AUSTRALIA is currently a level playing field----

Regardless of all of the above---role models arent limited to the wealthy.
Everyone Knows Whats right and wrong---but it seems many have no idea how to apply it.

 

[Smurf1976]

Hello Smurf

Didn't the 19yo need some sort of collateral for the home loan? Perhaps not. It's a long time since I had a loan and I guess things are easier.
Whatever, that's a scary story. Is the kid likely to be able to pay off the debts in the foreseeable future?
Julia

Realistically, I think they could pay it off over about 4 years if they maintain constant employment, which in this case is far from certain, and put increases in income straight into extra repayments. But realistically they are far more likely to make the minimum payments and then go back for another loan next time they want another car (which based on their history will be relatively quickly).

They started with a modest loan and a "normal" car. That lasted a few months. Then came the big loan and the nice car. Now it's another loan on top of the original one to modify the car (virtually all their income already gets spent on this so we're talking serious money here). End result is increasing debt to finance a depreciating asset.

As for collateral for the loan, I really don't know. The car would cover the existing personal loan (but it's not insured which really worries me). As for the new loan, I really don't know.

Who do I blame for this? Parents, teachers, the bank, government, SOMEONE ought to be putting some education and/or limits in place here. It wouldn't take a lot to end up with a worthless asset (crashed car) and huge debt.

That said, if someone is considered responsible enough to drive then they ought to be able to think about the consequences of their actions in other areas too, including finance. Personal responsibility. That seems to be viewed as being very old fashioned though.

I do view this attitude (in general, not just this specific case) towards debt as being just one example of an overall attitude in society these days. MUST have a mobile and a 12 month old one just won't do, MUST have a nice big car, MUST live in a good suburb, MUST have the latest electronic gadgets etc. And then something completely foreseeable, like fuel prices or interest rates rising, happens and they blame everyone but themselves for their situation. That said, in defence of generation Y, there aren't too many parents and teachers running around warning about what interest rates and fuel prices can do and in fact we have politicians constantly promising that all will be well. Hmm...

 

[krisbarry]

That is a well reported fact that babybomers are the wealthiest ever in the history of man-kind and most of the wealth has come about through real estate.

There is somewhat of a correlation between wealth and commonsense.

Commensense buys time to make educated decisions in life, and hence build wealth and not debt.

I did hear the story about the real-estate agent who said "Buy property where the nerds are buying" That way your wealth will always grow. Very true!

Even in a downward real-estate market the "nerdy" eastern suburbs of Adelaide full of brain power, degrees, doctors, lawyers etc, property prices will rise. Not so in the outer suburbs of the south and north that will eventually plummet first, and in a big way. Yes Tech/a your properties will be hit the first! Time to sell those properties mate and recheck those figures as the 26% yearly gains are gone, or about to go!

Lets look at another area that some may never have either considered...

Anti-depressant/anti-anxiety medication such as Zoloft, Aropax, Prozac are being handed out like lollies to many kids. These drugs alter thought process in the brain. All your cares/worries go away with these drugs. People can spend lots of money while under these medications and not worry about the damage they are doing. Then they just pop a pill and all their financial troubles just dissapear. DONT LAUGH ITS TRUE!!!!

To answer your greed question.... Greed IMO is when you have ample at the expense of the average Joe! Simply as that!

Now where is that fire?

 

[Julia]

Kris,

You seem to be getting back into the "politics of envy" stuff again. Every time one of these discussions about money/assets,investment, profit etc comes you seem to find it necessary to take a personal swipe at Tech's situation. Why can't you simply offer the credit that is due to someone who has obviously (a) worked hard (b) invested wisely, and (c) is clearly happy to pass on any tips or advice to anyone else who wants to do the same?

I don't think many of us have had the benefit of a charmed life where everything falls into place and what we want comes easily. On the contrary, most of the people I know who probably would be considered fairly well off now have worked really hard, taken some risks, and simply not been wasteful. I get a bit tired of the constant bashing of baby boomers. I'm not far away from this group and know that I've had times of really struggling to keep my head above water. But I don't blame the world for that. Lots of things happen which are really "unfair". So, get over it. Make the best of what life offers and find a way round the difficulty. The baby boomers didn't live on credit, they saved and then bought what they needed when they could afford it. When I first got married we had second hand furniture and we both worked two jobs. Went without things like TV and sound equipment because a washing machine was more important etc etc.

At the risk of sounding very "fuddy-duddy" I feel the whole emphasis of life these days is on the wrong area - things rather than relationships. It saddens me that such a simple quality as kindness seems to be in such short supply. A little less of "I must have....." and a little more of "how can I make a contribution to my community" would, in my very humble opinion, be a great benefit to us all.

One thing I do absolutely agree with you about, Kris, is the wholesale handing out of antidepressants and anxiolytics. It's in many cases another example of relinquishing personal responsibility for solving our problems.

Tech is right about the lack of appropriate modelling by parents, teachers and others who necessarily influence the attitudes of young people. A son of one of my neighbours, an introverted, sad little kid of 10, was suspended from his private school a couple of weeks ago. The suspension was because he swore at another kid who pushed him. The parents of this kid, despite displaying quite ostentatious wealth, use language which would make most people blanch when they berate each other. This kid, in a moment of anger, can't be blamed for spouting the word he constantly hears at home. In an additional act of irony, the parents added their own punishment by cancelling a week's holiday the kid had been looking forward to while his sister was allowed to go.

Julia

 

[krisbarry]

In my defence Tech/a was the first one to personalise this thread.

I was hoping it would stay generalized but it did not.

I was not attacking him at all, merely stating that baby boomers are generally very wealthy and maybe this is why it makes it difficult for younger generations to create wealth.

Check back on this thread and you will find that Tech/a threw the first stone!

Tech/a used my name first and henced personalised it, not me!

 

[Kauri]

Ah, I see the soap box is vacant again..
That is a well reported fact that babybomers are the wealthiest ever in the history of man-kind and most of the wealth has come about through real estate.

And if you buy a house now when your group (gen Y, children of B.Boomers.. or whatever the label will be ), will they be far richer than the current B. Boomers? When I bought my first house the people I bought it from had paid $14,000 for it, and were considered rich. I paid $51,000 for it, and now am considered rrich because of the effect of inflation etc. If I sell I will still only be able to afford to buy one house to replace it. Of course some have more than one house, but they are by far in the minority.
Instead of valuing wealth in dollar terms, try valuing it in house terms. My parents in their time could afford only one house, their parents could afford one house, and I can afford one house. I see us all as equally well off.
I see people who blame drugs, legal or otherwise, for their situation, as people who don't want to accept responsibility for their own actions, and I also don't think that depression is a modern disease.

 

[Mofra]

Not certain that it was due to exceeding a limit on personal loans, but why else would you have a home loan for a car? What he said to me was that it was "because I need more money than the personal loan". Whether or not it was possible to get a sufficient personal loan I really don't know. I assume the home loan interest would be lower though.

Any loan that is secured by property is classed as a home loan, and the majority of home loans in Australia are NOT for purchases or investments, they are for cars, holidays, basically anything that is both:

a. A depreciating asset, and
b. Non-tax deductable debt

I have been in the home loan lending industry a number of years and nowadays people don't apply for a loan of $x anymore, they ask what the maximum they can get is and then blow the lot.

I think it is unfair to blame a single generation for the appalling standards of bad debt that is handed out every day to anyone who can get it, as there seems to be no real age pattern, especially with the growing popularity of seniors loans (borrowing the equity from their property, only to be repaid after they die from the sale of the property).

I see cases every day where people on $100k, $150k (of any generation) have one property, no real assets and are up to their eyeballs in debt, so they refinance their home loans to pay the $100k+ in credit Card debt they have accumulated - only to do the same thing again as soon as they can spare the equity.

I am more worried about the credit bubble bursting than any other economic phenomenon on the horizon, if property prices fall by even a modest amount we could quite feasibly have a large proportion of this country (including salaried middle income earners) declaring bankrupcy.

 

[krisbarry]

Exactly my point Julia, why is it that we have two generations that cannot save for the life of them, while their parents were great role models by showing the need to save.

On one hand you are saying they are great role models and on the other you question why youth cannot save due to the lack of role models.

So which one is it?

 

[tech/a]

Kris you think in a funnel.

We are not saying that Babyboomers are ALL role models.
Infact in life there are very few Baby boomers or not!
Thats the problem.Many Many babyboomers could do with some guidence there are 1000s who have stuffed their lives up.Their kids along with them.

Back to this greed thing.
If everyone who has more asset than your undefined limit?? (Please define what is enough?) How you determine expense at the average Joe beats me.
The average Joe buys my properties,I was the average Joe once as well and I bought properties owned by the MR Bigs---so what.

So Bill Gates,Kerry Packer,Rupert Murdoch,infact any business owner must by definition be greedy.Any investor must be greedy.
I think you would feel happier if I sold my properties to Joe average at 1990 prices then they would have a chance to re sell them at 2005 prices---hahaha.

What then would define a bludger then?
Do you think anyone who doesnt take opportunities that are presented to them as a bludger?
If not why not?

I havent taken a personal swipe at you.
I have taken an interest in how you think.

I wouldnt be to worried about tech/a he's been down the road your having trouble getting on!

Oh Be careful what you play with!!!

 

[krisbarry]

My point is that teenagers/youth are almost opposed to anything their parents do and have done. That is the nature of being a teenager/young person. Always being stubbourn etc.

That is why my comment was raised about the fact they may look up to their parents and see that they were hard working and created lots of wealth, but do not want to go down that road and in fact thumb their noses at their parents. By...

* Working Less
* Getting into debt
* Not saving for a house deposit
* Travelling overseas

Why live out your parents life, says generation "Y".

Or maybe it is simply for the fact they see their parents as being so wealthy that they decide to live it up and expect that mum and dad will pick up the cost of their lifestyle.

Maybe they are questioning the need and value of working hard, creating wealth, buying a house, car, having 3 children, a dog, and of course the white picket fence!

Maybe they would rather have the debt, the technologies etc.

Thanks for the funnel comment Tech/a, just filtered that one straight out mate! LOL

Not going to comment on greed, you know how I feel.

A bludger is a welfare cheat!

 

[krisbarry]

I am more worried about the credit bubble bursting than any other economic phenomenon on the horizon, if property prices fall by even a modest amount we could quite feasibly have a large proportion of this country (including salaried middle income earners) declaring bankrupcy.

Yeah I saw it just a few weeks back on ACA. A street in Sydney lined with for sales signs on them. Too many average Joe's borrowing way too much money and investing in the property market at the wrong time. They had to work 3 or 4 jobs to keep up the payments. Then the property market crashed and now they are in a worse position than when they first started.

I do not feel sorry for any of them. Thats what greed does! They all bit off far to much than they could chew and now they are all chocking on the vomit of a very sick housing market.

Not only were they greedy but now they cry poverty, while they were the ones that started this god damn mess in the first place.

If Australians just eased up in the property market there would be plenty to go round for us all! Then no-one would need to choke on anyone elses greed.

And if you think it is only going to happen in Sydney, think again. The smell of vomit travels fast.

Oh god another property investor is just pewkin' now! Where is that chuck bucket?

 

[tech/a]

Unfortunately for younger generation "Y" the majority will be unlucky enough to become the Older generation "Y".

As you get older the choices you can make and opportunities become less.

Decisions you make today WILL govern your place in life TOMMORROW

Let me give you an example.

I private mailed you a few weeks ago offering you the opportunity to meet the leading television Ad man in Adelaide.His contacts in all Television stations in Adelaide are vast.He is highly respected by producers,directors and media operations people in Adelaide.His ability to open doors is not to be underestimated---I discovered this when invited to have lunch with John Singleton a few years ago.

I also have a friend who owns Motown Media one of Adelaide's go getter media centers---I to offered you an introduction here---their contacts are vast as well.

Kris in your wisdom you decided that you wouldnt even have the deciency to reply to my offer.
Your pig headed--frankly stupid attitude may well have robbed you of an opportunity that certaintly wont present itself again.


I find you a blueprint of many young people and as such my interest.
You have displayed here succinctly an example of the "Y" generation.

This is not a personal attack rather an observation one which you have offered up.

When you turn 50 youll have had the opportunity to be a bitter and twisted has been or one who can make a diference in peoples lives you choose to be involved with---you'll be able to look back with contentment or regret.

Your choice