The direct result of this ageing population will be increased pressure on those Gen Xs and Ys in the workforce to support the mounting strain that will be placed on public services such as health and social security benefits. For themselves, too, Xs and Ys will be forced to take responsibility in saving for, securing and building their own successful financial future.
Yet, many Ys, in particular, seem to be ignorant of the need to plan for their financial future. Consider some of the responses from the KPMG study:
• “Saving is something that is at the bottom of my list of important things … I only save if I have something left.”
• “I live for today.”
• “Superannuation is too far away, I will probably be 75 by the time I have it … I’d rather have a dollar today than a dollar then.”
Ys and Xs could start by paying themselves first
One popular way that Xs and Ys can begin to positively plan for their financial future is by ‘paying themselves first’. The concept is a neat reversal of the traditional way of saving and investing everything that is left over after accounting for expenses.
‘Paying yourself first’ means that as soon as you get your weekly, fortnightly or monthly pay packet you transfer a set amount of money into savings that you can’t touch. Many people will suggest paying yourself around 10 per cent of your income, but the decision is a personal one and depends on your regular income and expenses.
Having paid yourself first you can then, as is probably the norm, simply spend the rest of your pay packet on bills, other expenses and entertainment.
Best of all, just by paying yourself first, you will secure a portion of your earnings as savings, which can be invested in your future. This simple action of segmenting your pay packet as it arrives means you’re able to spend the rest of your money guilt-free, without worrying that you’re not saving for your future.
If you need a hand getting your money on track, call ipac on 1800 626 881 today for a no-obligation appointment with a professional financial adviser.
1 ‘Beyond the baby boomers: the rise of Generation Y’, KPMG report on the opportunities and challenges for the funds management industry, Bernard Salt (June 2007).
2 ‘Scenarios for Australia’s ageing population’, Australian Bureau of Statistics (4102.0 – Australian Social Trends, 2004).
3 Statistics sourced from ABS report, ibid.