A financial gap is growing between different generations of Australians.
The aging process has some important upsides. Sure, by the time we reach our 50s, half marathons may be a distant memory, and when a friend mentions ‘clubbing’, you’re more likely to reach for a 9-iron than a pair of dance shoes.
However new research by ME shows the arrival of grey hairs brings one very special advantage – increased financial comfort.
Seniors enjoy 16% rise in comfort
ME’s latest Household Financial Comfort Report confirms Australians aged 50-plus come up trumps when it comes to financial well-being.
The study found over the last five years, baby boomers (aged 50-74) have benefited from a 14 per cent rise in financial comfort. For the over-75s, financial comfort has clicked up an impressive 16 per cent since 2011.
It’s a very different picture on the younger side of the scale. The financial well-being of Gen Y (aged 18-34) and Gen X (aged 35-49) Australians has remained broadly unchanged since 2011 with a barely noticeable uptick of just 2 and 3 per cent, respectively.
Property holds the key
There are a number of factors behind this growing financial generation gap, and one of the key reasons lies in high levels of home ownership among older Australians.
Several years of soaring property prices have seen home equity levels leap ahead, and that has been a tremendous boost for the personal wealth of home owners across the board. Many older Australians have the added benefit of having held onto their home for the very long term – sometimes decades, to pocket particularly strong gains in property values.
On the flip-side, rising prices are making it harder for younger Australians to get a foot on the property ladder.
That’s not to say all younger Australians are doing it tough financially. On the plus side, ME’s research found increased confidence in job security, and households also report being better placed to cope with financial emergencies.
A home is more than our castle
Nonetheless ME’s research highlights the way that home ownership provides much more than a roof over our heads.
As our homes rise in value, the growing equity can be used to build further wealth by investing in a rental property or other assets. Even home owners who are content to simply sit back and watch their equity grow, benefit from a rewarding sense of security about their personal financial well-being.
A goal worth aiming for
For younger generations aiming to get started on the property ladder, there is no quick fix solution for the challenge of housing affordability. Nevertheless, as ME’s research shows, home ownership remains a goal worth aiming for.
Developing a savings plan, remaining committed to tucking away regular savings, and considering alternative strategies such as buying in alternative locations, can go a long way to making a first home a reality.
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