With each new generation, there are differences and defining characteristics that come to differentiate them from those who came before them and those who will inevitably come after. On a macro level, the conversation about generational divides gets into the same trenches of the subject of ‘nature vs. nurture’ that conversations regarding childhood do on a micro level. Is each member of a generational collective an island unto themselves, born into the world fully formed, or is each separate generation more properly defined, shaped, and formed by the world in which they are born and grow up?
For the purposes of academia and the study of history, it is far simpler to group individuals together. For example, looking at older individuals who fall into a specific age bracket as Boomers makes it easier and simpler to quantify them, but it also prevents one from actively engaging with the individual truths of members of that generation. Broad generalisations and stereotypes often fail to capture the complexities of individual experiences. As author Stephen King notes, the truth of one’s experience is found in the details, not in generalisations.
Each generation is comprised of millions of different people, each one remarkably different from the other. And yet, each of them grew up within the confines of the same period of time, experiencing many of the same events based on their geographic location. These events inevitably colour their perception of the world and shift their perspective as they grow older. This can also be seen in the case built around younger Australians and the housing crisis.
The Australian housing crisis has had a dire impact on numerous industries and fields within the country, but perhaps no single change has been more profound than that of how it has fundamentally altered the investment priorities of Australian residents between the ages of 18 and 30. This generation has grown up in the midst of the housing crisis, witnessing the effect it has had on their parents, grandparents, and peers. As a result, studies have shown they are far less likely to invest in real estate out of fear of the market, but it may be easier for young Australians to start small and invest in stocks instead. A recent study of young Australians aged 18–34 reveals that this demographic is twice as likely as those over 55 to focus on cash due to the rising mortgage prices.
Real Estate vs. Stock Market
The avoidance of investing in the property market illustrates a stark contrast to prior generations, reflecting the difference in values and upbringings. The younger demographic has lived incredibly different young lives than the ones their grandparents or even their parents did. Technology has connected communities around the world in unprecedented ways, which has absolutely been beneficial in many ways, but it has also led to younger individuals being vastly more aware of the inherent risks in investing.
As a result, this younger generation has different priorities. For example, one of Australia’s biggest stock trading platforms reported a 37 percent spike in new accounts last financial year, with 2.9 million investors under the age of 40 making up nearly half of the investors on the platform.
The Rise of Stock Market Investments
The percentage of young Australians investing in stocks is now far higher than that of young Australians who own property, with only 36% of Australians aged 25–29 owning a home due to affordability challenges. A huge part of this comes down to the fundamental differences, psychologically, between investing in stocks and investing in a home.
Millennial Investment Trends
To invest in a home is to invest in not only your own future but the future of your family. You are buying a house that will not only ideally serve as a safe and happy place for you and your current family to live and make memories in but also serve as a home for future generations of your family. It is a long-term investment that may take decades before it pays off.
Conversely, to many, buying stocks is a short-term investment and has more potential to reward investors on a short-term basis.
Gen Z Investment Trends
To return to the dangers of generalizations, it’s far too easy to derive from this that the younger generation is simply looking to make a quick buck and doesn’t have the patience of past generations, which has led to this generational divide. But to do so is to fail to meaningfully engage with the issues at hand: this generation has seen these long-term investments turn sour first-hand.
One of the primary components necessary for the long-term investment in housing to pay off is the reliability of the system itself, and the Australian housing crisis has proven precisely just how volatile and unreliable the system is t. To this end, the stock market’s potential for short-term winnings is not so much an indictment of the generation’s impatience but rather their reluctance to dig themselves into a long-term hole that may collapse in on them.
Low Financial Literacy Rates
Serving to only further exacerbate the issues that many young Australian investors have with investing in real estate is the fact that studies have shown that they have low financial literacy. Again, it’s critical to note that these studies represent broad findings relating to this generation and should be used as a platform to provoke further analysis rather than being used for judgemental or vindictive purposes. If an entire generation of Australians is failing financial literacy tests on a regular basis, it is worth reflecting upon the apparent failings of the educational systems in place or the older generations whose responsibility it was to teach them.
A new study shows that just over a quarter of people struggled to answer a set of fairly simple questions on the basics, such as interest rates, inflation, and investment risks and returns. The study by Allianz, a global insurance and asset manager, asked more than 1,000 people in Australia and six other developed countries nine questions to test their understanding of basic financial information. The results indicated that less than 20% of those surveyed had high financial literacy, meaning 80% had either average or below-average financial literacy rates.
Such illiteracy in a generation or a culture leads to a sense of anxiety surrounding long-term investments, as people fear that which they fail to properly understand. This, combined with first-hand memories of the housing crisis and its fallout, has led to younger Australians avoiding the kinds of potentially detrimental long-term real estate investments that earlier generations ran into so heartily.
Pushing Forward
In the broadest of ways, generations are defined by the failures of the generation before them. If one generation fights in a worldwide war, the next generation begs for peace. If one generation believes in financial institutions yet falls victim to an economic crisis, the next generation is inevitably disillusioned with said institutions. Moving forward, the financial landscape of Australia is bound to change as its younger generation comes of age and takes leadership of the country. But even then, the next generation will have vastly different priorities and continue to push the boundaries of the market in their own uniquely similar ways.
