With the rising cost of housing, an aging population, climate change and now a pandemic falling squarely on the shoulders of Australia’s millennials, how is this generation faring financially?

The first millennials (born between 1981 and 1996) are turning 40 this year. Still, despite more than twenty years in the workforce, it seems their financial wellbeing isn’t guaranteed.

A Commonwealth Bank study has found that almost two thirds (61 per cent) of millennials (also known as ‘Gen Y’) don’t have a regular savings plan, while 1 in 10 are still living pay cheque to pay cheque. A third (31 per cent) say they don’t feel comfortable talking about money.

Yet, millennials haven’t let go of the great Australian dream. More than half (58 per cent) are holding out hope they’ll be able to buy a house in the next five years. Currently only 28 per cent of millennials own their own home, according to the study.

Structural challenges 

After a decade of slow economic growth, little to no wage growth and spiralling housing costs in our major cities, it seems millennials are feeling the pinch.

While older households have done well from rising house prices and superannuation, research by the Grattan Institute shows that the wealth of millennial households has barely moved since 2004.

“Poorer young Australians have less wealth than their predecessors and are far less likely to own a home,” the study’s authors say. “In contrast, older households’ wealth has grown by more than 50 per cent over the same period because of the housing boom and growth in superannuation assets.”

Contrary to popular belief, the report’s authors say there’s no evidence that millennial spending habits are to blame for stagnating wealth.

“In fact, younger people are spending less on non-essential items such as alcohol, clothing and personal care, and more on necessities such as housing, than three decades ago.”

No issue with soy lattes and avocado brunches then it seems.

A COVID-19 legacy?

Adding to the financial worries, more than a third of millennials (37 per cent) say they’ve been affectedfinancially by the COVID-19 pandemic, the highest of any generation.

And, while the pandemic has further stifled wage growth, it’s also is forcing many to ‘shelter in place’, choosing job certainty over career advancement. It’s unclear what the longer term impact of this will be, but redundancies and lack of career progression in some industries is likely to shape our workforce for years to come.

Resilience in the face of hardship

Despite the cards being (economically) stacked against them, it seems Gen Y are a resilient bunch. There’s evidence to suggest they’re more financially savvy than previous generations.

A study by Afterpay[1] found that more than 80 per cent of millennials budget, compared with only two-thirds of older generations. They’re also 30 per cent more likely to save regularly than their parents.

UBank agrees, saying that Aussie millennials take an active interest in managing their own finances, and are the most likely to budget.

“Despite 45% of the population admitting their finances have been negatively impacted in the last six months [by COVID-19], we’re seeing millennials emerge as being quite resilient,” said UBank executive, Philippa Watson.

“They’re taking the opportunity to implement budgeting and saving strategies to keep their financial goals, such as buying a home, on track, with many putting away half their salary each month,” Watson said.

A transfer of wealth

While the wealth of millennials pales in comparison to older generations, that could be about to change. According to the experts, Australia is on the verge of its largest ever handover of wealth, with up to $3.5 trillion in assets set to pass from baby boomers to millennials over the next 20 years.

Boomers are said to be the wealthiest generation in history, having lived through some of the most prosperous years on record. How much of that wealth they’ll pass down to their heirs is anyone’s guess though. Boomers will spend close to thirty years in retirement on average, so they’re just as likely to spend their ‘hard earned cash’ rather than gifting it to their heirs.

Financial wellbeing top of mind

With the millennial generation now hitting their thirties and forties, major life events like home ownership, marriage, children and saving for retirement are taking centre stage. Good money management and financial planning are becoming increasingly important, especially given the structural, economic and environmental challenges they face.

It’s a positive sign then that 1 in 2 millennials say they want to have more open discussions about money, with more than half of those (54 per cent) keen to know how to get ahead financially, according to the Commonwealth Bank research.

For a generation that came of age during the global financial crisis, a global pandemic just over a decade later might feel doubly unfair. But it seems millennials are nothing if not adaptable, and resilient. Getting the right financial planning advice now will help millennials navigate the challenges that come with this stage of life and ensure their financial wellbeing far into the future.

If you’re in your thirties or forties, now is a great time to start planning for your financial future. Speak to a Certified Financial Planner® (CFP® professional) about ways to achieve financial security and freedom for yourself and your family.

Money & Life, FPA