ACCORDING to McCrindle Research’s Mark McCrindle, the global financial crisis was necessary for generation Y, which he describes as “the most materially endowed generation in history”. He argues that the financial downturn was necessary for young people to learn how to cope with an era different from the only one they have ever known, a time of economic growth.
The problem is gen Y (those born 1980-1994) have little or no resources to help them find and keep jobs, realise they need to pay down debt — particularly credit card debt — save money and learn to live with less affluence.
It may not be fair to say gen Y had to have this happen to them, but the previous generations certainly knew times of far less affluence. But surely there could have been an easier way for gen Y to learn these lessons. Not all the generations born since World War II — boomers (those born 1946-64), X (those born 1965-79), Y and even Z (those born since 1995) — needed a recession to learn how to manage debt.
However, had property prices kept going up at the rate they were prior to the GFC, gen Y and even Z may never have been able to enter the property market. Now, with more stabilised property prices, if they save their money, pay off credit cards, they can possibly enter the market.
Of course, there is often a flipside, in this case it’s that many banks have increased the minimum deposit they require and have done away with 100 percent home loans. The majority of lenders are now asking for at least a 10 percent deposit in Australia.
A bigger deposit really is the ideal scenario for all parties, but where that is not the case and an applicant is in stable employment with a good credit history, there is a way to enter the property market without the usual minimum of 10 per cent deposit.
A select few lenders will accept a 5 per cent deposit for a first home loan, as long as they are an existing customer (for at least six months) with good conduct on their accounts and can show a genuine saving history.
Learning to live with less affluence is not as bad as it might seem, especially when it’s pretty much the same story for everyone. You might find that none of the VIP things you thought you needed really mattered as much as having a secure financial future.
Your say: Do you think the recession was necessary for gen Y? How have you dealt with the GFC? Email us on [email protected]
