Half of all people under 40 could not find $5000 for an emergency without going into debt, according to a new report.
That is one of several dramatic revelations in a study showing Millennials and Generation Z were worst affected by the cost of living crisis.
The report is titled "Money and You: Young People and the Cost of Living Crisis," and was published by the Financial Services Council (FSC).
It was based on a survey done for the FSC over three successive years by the research firm CoreData.
It shows that of all age groups, respondents in the Gen Z and Millennial brackets had lower levels of financial wellbeing, literacy and confidence than other groups.
“We know from our annual Financial Resilience Index research that there is a significant correlation between finances and overall health and wellbeing,” says the FSC Chief Executive, Richard Klipin.
“What we’ve found in this latest research is that financial issues are hitting some groups harder than others, and it appears our younger people are facing the full force of the current economic situation.”
The FSC says this must change, since young people are the future of the country. It says the finance sector has to support them in making important financial decisions like choosing an insurance policy, selecting investments and planning for retirement.
The study found some positive factors, such as Millennials and Gen Z's being confident in making decisions about careers, and safeguarding their mental health and wellbeing.
But the difficulty in getting access to a $5000 buffer for an emergency without borrowing was a significant finding.
Only 42% of Gen Z could do this, compared with 51% of millennials and 55% of Gen X. The figure rises to 64% for Baby Boomers and 81% of Pre-boomers.
Other parts of the research showed Millennials and Gen Z far less likely to have credit card debt but more likely to have personal loans or Buy Now Pay Later.
In the survey, respondents were asked a simple question about financial literacy: Could they buy more or less after a year if the interest rate on their savings was 1% per year and inflation was 2%. Less than half of Gen Z and Millennials got this question right, though all other age cohorts passed the 50% mark.
Retirement was also a problem. Only 26% of Gen Z'ers had calculated how much money they would need in retirement, compared with 39% for Millennials, 50% for Gen X, 59% for Boomers and 71% for Pre-boomers.
Gen Z and Millennials were also universally less confident about making a series of financial decisions on several issues: banking, insurance, investing, budgeting and saving for a rainy day.
The research also found that 23% of Gen Z and 58% of Millennials own a home, though neither group had high insurance levels.
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