Too poor to be responsible?

Personal Finance

Introducing Elizabeth Davies, a university student who reckons the dream of a house, 2.5 kids, station wagon & golden retriever seems far away

24th Jun 13, 11:46am by Elizabeth Davies

<a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

By Elizabeth Davies

My name is Elizabeth Davies. I’m 23 years old student and I’m $36,000 in debt. Believe it or not, that’s below average.

I was brought up in a well-off family but was always taught to be conscious of money and be careful with it.

When I was 15 I got my first job. All of my earnings went straight into a savings account and I did my best not to touch them.

When asked what I was saving for I answered with a very vague and nervous, “the future”.

When I first decided to move out of home my Dad didn’t tell me I was too young and immature, or not emotionally ready. He simply smiled at me and said, “You can’t afford it.”

I lasted two months before crawling back to the Promised Land where showers could last more than two minutes and there was something on the menu other than toast.

My second attempt was slightly more successful. I lasted 10 months, the full university year, right up until Studylink cut off my weekly loan allowance when the semester ended.

I had just finished post-graduate study. I still didn’t know what I was doing with my life and I was humiliated to have to go home. Dad didn’t say much, but I felt like a burden. My pride and self-esteem took a real hit.

I spent six months unemployed before finally securing two soul-destroying, minimum-wage jobs. I worked five days and six nights a week. Thanks to secondary tax and compulsory student loan repayments I took home less than $450 most weeks.

I scraped together enough cash to move out again in December last year and secured a flat with my partner and four friends. Things were blissfully cheap but after six months of close contact living I was done.

My partner and I put together a budget and made the massive decision to get a place of our own. At this point we are both studying and earning very little.

My partner Mike is 27. After 10 years working as an electrician he decided to return to university to get an electrical engineering degree.

Mike knows a fair bit about financial sacrifice. He has spent his last three summers working in the WA mines to avoid a student loan and support himself through the year.

While most students are travelling, drinking, and lying on the beach, he’s working 12-hour days in 42-degree heat in a place you’ve never heard of.

As I’ve got older I’ve constantly marvelled at just how much you have to spend in order to simply be responsible.

For example, I know that I need car insurance, renter’s insurance and health insurance. I’m not unwilling to spend the money. I simply don’t have it.

So I’m forced to choose.

Car insurance is unavoidable, at least third-party to protect me from those Audis that seem to pop up out of nowhere.

Renter’s insurance is essential, just in case I accidentally leave a scented candle burning and the curtains catch alight. (No it’s not for atmosphere, it’s to mask the scent of cat urine in our old bungalow.)

So health insurance doesn’t quite make the cut, something that becomes increasingly concerning as my un-insulated home threatens to turn a mild cold into a chronic chest infection.

As I get older I find little comfort in the prospect of approaching a steady wage. I’m constantly bombarded with harsh realities of increasing house prices and Mike and I are left terrified.

We are careful with our money, we do our best to save, and we definitely don’t lead extravagant lifestyles. But is that enough?

Will we ever be able to achieve the ultimate goal for a young Kiwi couple? The dream of our own home, 2.5 kids, a station wagon, and a golden retriever doesn’t seem any more attainable as we get older – in fact it only seems further away.

At my age financial life is about sacrificing what you want for what you need, and then swiftly realising that what you need, you can’t afford.

*Elizabeth Davies is a 23 year old post graduate journalism student at Auckland University of Technology. She lives with her partner in Epsom and spends her free time refurbishing vintage furniture and attempting to bake while fighting a daily battle against her bank balance. She writes a weekly article for interest.co.nz on money matters and financial struggles from a young person's perspective.

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79 Comments

by houseofgod | 24th Jun 13, 12:10pm 1372032600

A provocative essay.

I am sure that many people who read this will tell you to harden up, get your head down and bum up, that things were tougher in their day.

Others will be supportive.

I dont have the answer but I do know that this week at work I am going to be helping the health system spend the equivalent of a house deposit on each of a number of elderly, often demented patients, not out of compassion, but out of some misguided attempt to avoid anyone pointing the self righteous finger of discrmination or some other misguided emotion.

The demand for this ridiculous level of medical care will be driven by their children, baby-boomers who have worked all their life, who now want to enjoy the rewards without some old person staying in their house. The guilt that comes with this can only be assauged by holding some third party responsible (rest home, hospital, anyone else) for their old people.

Of course, at the same time, as it is winter, brown babies will be turning up at the hospital with chest infections. No Wilimington-Smyth's, just lots of Jaydens, Kobe's and Wiremus. [ -------- portion deleted -----------. Racial sterotyping not acceptable. Ed.] ... the kinds of housing the state built for the white middle class now drinking latte's and driving Audi's.

Luckily there are not many old brown people around, they died young, at home, looking after someone untile they had to be looked after.

And just in case you start to dislike the blue rinse latte sippers, dont forget the market will provdie a mechanism to fleece them of their supranormal profits before they die. It is no coincidence that the best peforming companies on the stock exchange are those that farm elderly people for a living.

We dont care - anymore.

by Kate | 24th Jun 13, 2:00pm 1372039245

Wow houseofgod, you are on the money (literally) there. I went to a funeral last week. An 80+ year old who spent the last two months of his proud, independent and strong-willed life suffering (in my opinion unnecessarily) at the hands of our ridiculously interventionist medical system where aged care is concerned. After two amputations and faced with the medical profession recommending a third - one of his daughters told us that in his last week of life he said to her: I just want to go home and make my own decisions. He refused the third operation and passed away peacefully a few days later.

I saw the same overly interventionist care where my mother was concerned. Again, multiple operations and hospital admissions in her final three years of an 80+ year life. After the first op went bad (which they do more often than not when you are 80+), we convinced her to move in with my brother. He and his wife are living saints as the copious amount of drugs she was given in hospital had impacted on her brain function - and the 'cure' was more mind altering (altzheimer type) meds.

All this was happending in the States. I decided to visit as I could see this putting such a massive strain on my brother and his family. While there a home nurse came to their house and took my mothers blood pressure. It was so low - I could quite understand the feinting episodes, the incoherance, the overall weakness. I asked why in the world she was on blood thinning medicine and the nurse responded, "well the doctors like to keep elder patients pressures quite low". How ludicrous I thought - they won't let her die of natural causes. So, once the nurse was gone, I suggested my brother and sister-in-law stop giving her those BP meds. Yikes, it was as if I'd spoken the unspeakable. They could be held responsible. I couldn't even think that for fear of legal retribution. We said nothing more of it.

A year or so later I returned as another surgery was scheduled. It too was unsuccessful and when the surgeon turned up in hospital to explain the offending false hip would just have to stay dislocated - and what the next lot of rehab would entail - I asked, can't we just take Mom home?

This was an unusual request. Most kids welcomed (if not relied upon) the free stay in rehab facilities that Medicare provides. The surgeon was wonderful - ordered a hopsital bed for her and everything else we'd need to care for her in the home, in addition to visiting nurses. He also agreed to unprescribe the blood thinners. Mom passed away peacefully in my brother's home of a blood clot, likely in the brain, a few months later.

We need to have this conversation as a society. We need to teach ourselves as elders, children of elders, and medical professionals how to say no, or at least to give elderly people the choice to say no to these myriad of end-of-life interventions. We are indeed misguided in this regard.

Lastly, I know this is a bit long, but I think we all need to think about this. On passing 50, my GP started approaching me with preventative medicine type stuff - orders for blood tests, suggestions I go and get this and that early detection screening done, come in for a check up, a mole map, a this and a that. I tossed all the stuff in the rubbish for about the first year. Then got pressured if I went in for treatment of a cold - kept saying I would get these things done, so kept getting the stuff in the post. Avoided all the early detection screenings but decided to have a blood test - really don't know why. Came up I have high cholesterol. Said I didn't want the pills - so would alter my diet. Did and it came down but (apparently) not enough. Said I'd stick with further dietary re-work. Came down again but (apparently) not enough. Rpeated that exercise one more time. Again the call from the nurse, "you really need to make an appointment with the doctor, to discuss this" - meaning, you really need to take the pills. Anyway, I now have the pills - but I still wonder why. There was no screening for high cholesterol during my grandparents time. So if they had it, well they lived - and died - with it. What is so wrong with that? The main reason why I didn't just say "let's just forget it" was because I didn't want to insult these health professionals.

But just think - what if I was given the opportunity to refuse the meds and have the money I saved go directly towards paying off the student loan or the mortgage for a person of my own choosing? How many parents/grandparents would make this choice if given the opportunity. Probably most, I'd say. I just wonder why we aren't having this conversation.

by midgetkiwi | 24th Jun 13, 3:32pm 1372044720

" I just wonder why we aren't having this conversation."

Like your thoughts Kate. As someone in the healthcare field, there is a sad conundrum in the mindset of health professionals. In your example of your blood tests, and the subsequent cholesterol pills, the problem is if the doctor does not suggest a raft of preventative tests/interventions as you get older, then he could be had for negligence if you had an episode of something that was remotely preventable. ie. If you had a heart attack and cholesterol pills weren't prescribed when you had elevated cholesterol, then it becomes his problem. So 2 problems here really - people who are uninformed, or unwilling to be informed so they can take responsibility for their lifestyle/health (you have obviously stepped up and done some good diet-control to reduce your levels, which is great). As less people want to take responsibility for their daily bigmac, the GP can sometimes be overblamed. The flipside is because the GP has to almost over-intervene, is that you need a patient who is willing to think for themselves, realise that good medical advice does not equal good quality of life, and have the confidence to make a decision themselves (yes I will take cholesterol pills and understand the side-effects/risks, or no do not want those risks and instead will diet control). Like you said earlier, some people like to pass the buck.

by Ms de Meanour | 24th Jun 13, 3:52pm 1372045972

I've often thought that I would not want to be a burden on younger members of my family if my health or marbles were to deteriorate as I get older.

On the other hand, I hate the thought of my dear old relatives feeling that they ought to forego treatment that they need rather than be a burden on me. And I hate even more the thought of elderly people being pressurised to do so by unscrupulous younger family members.

That leaves the medical professional with the task of judging whether an elderly person declining treatment really is making a free choice that they genuinely understand and believe to be in their own best interests. Tricky one. Do they cover this in medical training?

by steven | 24th Jun 13, 4:19pm 1372047540

Medical training, interesting view point, I'd suggest Doctors are usually very empahetic ppl, just to want to do the job in the first place. Most of the ones Ive met / know anyway, a few are just in it for the money and status...fortunately for us patients, few. And yes ethics seems to be discussed at great length certianly outside the classroom. While I did my enginering degree many of my friends went through medical school so such discusions over beers / time off was quite frequent.

Old ppl and their medical needs will double, so thats some burden. Q is why have those ppl not aimed to to look after their own needs rather than cripple a younger generation who dont even get to choose, yes or no? Take the Cullen fund, just as easily this passing generation could have put say 1% away for a rainy day, they didnt...or the ppl who they voted in, didnt.

regards

by Kate | 24th Jun 13, 5:15pm 1372050900

On the other hand, I hate the thought of my dear old relatives feeling that they ought to forego treatment that they need rather than be a burden on me.

Point is - a the first poster points out - few in today's society take on the burden of their elders themselves - rather that burden, as you say, is passed on by the relations to the state. That is the norm.

by dh | 24th Jun 13, 4:42pm 1372048955

I recall reading a article last year that doctors expected families to demand life prolonging techniques that the doctor would refuse for themselves- the doctor writing the piece in the Wall Street Journal described most such treatments as "death prolonging" not life prolonging.

“Why Doctors Die Differently” -

http://online.wsj.com/article/SB100014240529702039183045772433212428339…

by Kate | 24th Jun 13, 5:07pm 1372050420

That is an excellent article! Should be a must read for everyone - and it is his type of insight which the medical profession has that should be taught to everyone else. Perhaps our GPs should be sending us off to publicly funded seminars which explain these issues and allow us to put such end-of-life planning/directives in place.

by dh | 25th Jun 13, 5:44pm 1372139045

I encountered another similar article just now, more numbers but less explanation

http://thesocietypages.org/socimages/2013/06/24/how-do-physicians-and-n…

by Von | 24th Jun 13, 5:55pm 1372053321

Kate you are woman after my own heart! I'm probably older than you nearly 66 and have continuously had discussions with my doctor prescribing me with high cholestoral pills, BP pills etc. My cholestoral is low - under 2 and yet I've been told that I have to take these stinking pills becos my twin brother had a stroke at 45. He was obese then for goodness sake. I take them - but hate them and am thinking of stopping them. My dear old dad was taken to a resthome in his 88th year, lasted until 91 and hated every minute of being in that home. He died of pneumonia after refusing any more medication. Just as I believe right now they are keeping Nelson Mandela alive with medication. Let the man go.

I have at times accused my doctor (who is very nice I have to say) of being nothing short of a drug pusher for the drug companies. Agree our grandparents weren't given all these meds to keep them alive - mine still lived to the ripe old ages of their mid-80's through hard work and good diets. So here's looking at you kid - we might last till we 90 with no meds.

by Kate | 24th Jun 13, 6:18pm 1372054680

Exactly, I'm similarly contemplating stopping them (and I've on;ly just started!).

But that aside - Pharmac is currently consulting with the general public about just these sorts of matters.

Have your say here;

http://www.pharmac.health.nz/about/operating-policies-and-procedures/decision-criteria-consultation

by Belle | 24th Jun 13, 6:25pm 1372055142

Dont take those pills Kate. High Cholesterol in women usually means a long life. Dr Oz and his experts said so :-)

by Belle | 24th Jun 13, 6:25pm 1372055148

Dont take those pills Kate. High Cholesterol in women usually means a long life. Dr Oz and his experts said so :-)

by Andrewj | 24th Jun 13, 6:37pm 1372055869

I wouldn't touch them either, try cutting sugars and refined carbs out of your diet first. I think high colesterol is a good thing, they keep moving the goal posts, look at what was normal levels 10 years ago, before they had pills to lower.

by Belle | 24th Jun 13, 7:15pm 1372058137

Statin drugs are bad news to most who take them. (Dr Ozs experts were a couple of very experienced heart surgeons). Sugar is the enemy. Not fat...apparently

by kiwimm | 24th Jun 13, 12:35pm 1372034123

This is not a slight at you but to help others looking forward. The main problems I see here:

You went into debt to study journalism (a career with low lifetime earnings potential)
You have a car. Walk/bike/bus should be your only option for now.
You live in Auckland. Both of your careers are transportable, consider living somewhere cheaper.
You still have debt yet are considering a mortgage

Until you can live on less than you earn and can save a significant (25%+) of your salary, don't consider buying a house. How do you expect to cope if one of you is out of work or takes time off for family?

by Happy123 | 24th Jun 13, 3:03pm 1372042995

Kiwi, good list but you should also add - "Things were blissfully cheap but after six months of close contact living I was done."

Seems to me they had the answer but should have stuck with it for more than 6 months. I lived in a flat share for years because it was cheap, it's not always ideal but you've gotta suck it up.

by scarfie | 24th Jun 13, 3:33pm 1372044818

Actually that is all just deck chairs, this girl paying unearned income at every corner, mostly usury. All those suggesting just mean more money to put in the usury pot but the thing is that should she do this she will just find the pot gets bigger.

by powerdownkiwi | 24th Jun 13, 12:40pm 1372034437

An honest piece.

We live in a dog-eat-dog world, where we try and best each other in trade, but smile politely for the rest of the time. The dogs who currently hold the cards arent going to let them go voluntarily, and the whole pack is in play, or very near it. That means lobbying to change the rules of the game (Bernard Hickey's tax approach for instance, free education being another, outlawing landlordery, usury, being others) or the youngsters like the writer using lateral thinking within the system. By default, not everyone can do the lateral-thinking thing (some can live on boats in marinas etc, cheaply, but not everyone can).

Some of us are working on ways to share what we were lucky enough to get when it was available, while safeguarding ourselves - a tricky juggling-act, and one which the rules (who can live in what, on how much land) are not particularly helpful of. If we worked on those lines as a society, perhaps we'd get somewhere.

Co-housing is one way to circumvent things, not the perfect answer but better than most. The time is also ripe for an interface between 'oldies who have' and 'youngies who haven't'. Again, the fear of the former (of being taken advantage of) and the fear of the latter (of not being able to take the fruits of their efforts with them if they move on) need to be addressed if such a system was to function.

by bob | 24th Jun 13, 2:15pm 1372040100

Co-housing is an interesting option. Got my first house by buying a hovel in what we knew was going to become a good suburb with friends, then spent every weekend for a few years doing it up. It was about 14x my income at the time - but split 2 ways was only 7x.

Required a lot of goodwill and cooperation, but looking back was a great time.

by iconoclast | 24th Jun 13, 1:08pm 1372036107

Thoughtful piece. Well written.

A question from a greyhair who worked in the newspaper industry for a number of years

What was your thinking (your intentions and aspirations) when you

enrolled in journalism?
subsequently undertaking post-graduate study in the same field?
and racking up debt to do so?

by xingmowang | 24th Jun 13, 1:03pm 1372035812

I'd be a plumber/electrician/carpenter/tradesman, if my IQ is not up for some very hard Uni courses, which will guarantee me high income jobs.

by iconoclast | 24th Jun 13, 1:13pm 1372036388

One of my offspring is a double-degree with honours in electrical engineering and has never worked in the field because there aint too many jobs going in it

by scarfie | 24th Jun 13, 3:39pm 1372045143

Yep, a good friend with 30 years experience in the field up to management level has just this week taken a $50K per year job. His example is a great one for those clowns that suggest he and his wife move somewhere they can afford to live rather than their close call with a mortagee sale in Auckland. He has two school children and both sets of grandparents are within a short radius of where they live, its called family.

For what ever reason, when residents of a city can't afford to live there than that city has gone awry.

by Phil | 24th Jun 13, 1:22pm 1372036976

At 23 and 27, don't forget that you're still young! You've got your whole life ahead of you.

My partner and I had our first 'housiversary' over the weekend. We're 31 and 32. Many other couples our age are just starting to think about getting into home ownership and what it really means for the change in lifestyle.

Where perhaps in previous generations owning a house was an attainable goal at 25 or so, that's not the case today - and personally I don't think owning is as big a deal or as necessary today as some people make out. We were also very fortunate to have an inheritance from a deceased father that helped us bring in a decent deposit to the bank.

This is a very round-about way of saying: enjoy being young and having the worries of youth. Let the worries of older age and home ownership come later. That's not to say 'don't try to save' - it's still an admirable goal worth pursuing, but don't let saving for a house get in the way of enjoying the opportunities the world offers.Save for an OE. Save for a holiday somewhere you've always wanted to go. Save now for experiences, not ownerships.

by dobrydan | 24th Jun 13, 1:27pm 1372037220

Your father gave you the best advice.. "you can't afford it".

Living at home through University would have reduced your debt by more than half (assuming 15k in tuition fees for 3 years and that your parents would still feed you FOC).

The simple reality is that to get on the property ladder you will both need a combined income of $140k to buy and live in AKL. Forget children or forget Auckland...your choice would be understandable.

Alternatively, move abroad... this government is doing very little for your generation so find somewhere with more opportunities or tax incentives. eg UAE.

I teach young people at High School and there will be more of the same to come.

Good management not luck is what you both require to live in this country with plenty of sacrifices to be made.

by The best statu… | 24th Jun 13, 1:49pm 1372038586

Having a good job is not a right, but a want. Should have done a course that had potential instead of being in a low paying feild such as journalism. When you go to Uni and need debt you need to do a cost/benefit avalysis as $36K is not a trivial amount of money to owe.

All she forgot to add was to vote for a Labour/Green government and I will be able to live on the free money I get from them.

by rlm | 24th Jun 13, 1:54pm 1372038872

I think this article captures a common feeling among many recent grads. You've followed what should be the prescription to a comfortable life but it doesn't seem to work. Instead you get a pile of debt and low paying service jobs.

There's always plenty of older folks who can tell you about how wise they were and how you should follow their recipie, but fact is things have changed. It is harder to get established now - real wages are lower, house prices a higher multiple of income.

So when do our youth settle down and have offspring to keep our economy going? after they purchase property at 35? We seem to have built a country which can only sustain itself by immigration, as heavily indebted young get too old to have more than 2 kids.

by gibsont | 24th Jun 13, 7:24pm 1372058645

Completely agree - this is a big problem in many western countries today. Graduating high school students are pushed straight into university before they've even had a chance to experience the world for a bit and figure out what it is they actually want to do. They then emerge with a completely useless degree and end up with an entry level minimum-wage job because they don't have any work experience (teachers and university staff seem to make a point of putting study ahead of earning a living, meaning many students are expected to sacrifice working and instead try to live off the student loan or allowance, racking up huge levels of debt).

If you look at the States, many employers expect prospective employees to have a degree, regardless of the actual work involved (i.e. you need a degree to be an office junior!). NZ seems to be heading in this direction.

by raf | 24th Jun 13, 1:57pm 1372039020

An interesting piece and good comments to boot. It's almost a state of the nation speech. Where are we as a society and where are we going?

As Xing notes, too many young people are heading to University to study without thinking of their career path and the costs involved. 20 years ago, it didn't really matter. A degree was still valued and considered an important differentiator for employers. Now, degree inflation has devalued its value, whilst the cost of a degree has become an enormous burden.

Simply put, young people are not doing the math. Is the investment in higher education worth the return? It's somewhat ironic that Polytechnics spent so much of the last 20 years trying to become Universities, when now the cry is for more vocational trading :-)

I think there are many aspects to this problem but here's a few for consideration:

1) The world has changed. The end of the official Cold War spurred massive waves for globalisation and new credit. Global population has exploded and new cheap labour has gutted developed economy's labour structures. This has changed the nature of available work and made it very difficult to plan one's career or livelihood.

2) We have wasted the gift of globalisation (cheaper goods) by investing that surplus into boosting property values and not into better quality of life for all. This is because we have no version of society outside one determined by economic growth. If we don't know where we're headed, any road will take us there. So many of those with access to capital have benefitted from what is clearly "unearned income" (me included by the way), whilst those who have simply had their labour to offer, have seen themselves become relatively poorer over time.

3) Stupid and irresponsible governments and governance. There's been a complete failure of basic governance, with the cult like belief in the "independent central bank" as a cornerstone of policy failure. Central banks have presided over never before seen credit expansion whilst admiring the collapse of inflation brought on by globalisation and not by their amazing control of interest rates.

4) Our expenditure of end of life medical intervention, as houseofgod notes, is obscene. Again, we have lost touch with reality here, as we seek to extend life at any cost, whilst not being able to fund basic healthcare for the young. This just doesn't make any sense at all. But as medical technology improves, expect demand from the greyhairs to continue forever!

I'm sure there are more but these are some of the key ones. As PDK says, co-housing or living with the 'rents may be the way forward until house prices adjust to incomes. Many cultures do thsi as the norm (India and China as an example). Perhaps, the idea of everyone have their own house and 1/4 acre dream may be over and we may return to a more communal living. Perhaps not. NZ has the land, other countries don't. At some point, there needs to be an adjustment but it won't be easy.

In the meantime, you have to deal with the cold, hard facts. Think carefully before you take on any debt!

by KH | 24th Jun 13, 2:29pm 1372040975

I was young, poor, without things and happy too. It worked out for me. There was a future for us.

But I think the kids of today are really up against it. No future is built in for them.

Globalisation has made a difference. Living beyond our nations means will get us in the end. And already destroying the kids right now.

Apparently there will be a shortage of young with the changing demographic. But apparently they are not wanted as workers either. Work that out. I can't

I am concerned for many young unemployed I know personally. And at the same time I see calls for importing labour. Work that out.

The educationalists, who claim to be some sort of social arbiter. Gleefully suck the young into expensive dead end courses. Immoral. Masses of unemployed graduates are almost a defining feature of a third world country.

New Zealand owned businesses struggle with crumbs against the rapacity of monoply.

How did we as a nation let this happen.

by Mark | 24th Jun 13, 2:52pm 1372042320

[Sorry. Although I am sure your comment was intended to be ironic or humorous, but it came out as 'low quality' which is why it has been removed. Ed. See our current comment policy here.]

by Happy123 | 24th Jun 13, 3:31pm 1372044715

This is typical gen Y.

You did a worthless degree, and got into heaps of debt to do it, now you can't earn good money.

How did you manage 36k of debt? It wasn't long ago I did my degree and course fees don't add up to that. I suspect someone used the student loan to buy a car.

I worked full time while studying and that involved a lot of 10 - 12 hour days but I came out of it with no debt and a worth while degree. Even after graduation and getting a good job I lived in a flat share for a number of years and didn't own a car for the first five years.

The key to success is sacrifice and hard work. There are no easy solutions and I have no sympathy for those that seek just that, I have even less sympathy for those who seek to blame others for their plight.

by gibsont | 24th Jun 13, 7:46pm 1372059976

While I agree with your last statement - that success is gained through sacrifice and hard work - I take offence at your opening line. This is not "typical gen Y". She took on study in a field that she enjoyed (I hope!) and is now obviously starting to put that degree to good use by getting a foot in the door with a weekly column here.

$36,000 debt is easily gained through 4 years of study at $7000ish a year plus textbooks etc. And she did mention she took out living costs. Granted, it's not an ideal move but Auckland is expensive.

All the generation bashing really grinds my gears - the stupid decisions that (supposedly) all gen Y make are due to age only. Gen x, baby boomers, they made stupid decisions in there teens and twenties too - it's not typical of a generation (which is just a media construct anyway). Similarly, all the 'rich baby boomers' are have not ruined the futures of the younger generations. They worked hard and they invested for their future in a way that made sense and was open to them (rental property - IF they had the extra savings to do so which MANY did not. I imagine purchasing shares would be much more confusing investment to get in to in the past for your average Joe). There are simply more baby boomers than subsequent generations, which yes will put strain on the economy in coming years - but that's not their fault!

I've gone off topic.Suffice to say, you can't just steriotype everyone in certain age bracket.

by nzpaulmartin | 24th Jun 13, 3:39pm 1372045199

Go and live somewhere else other than Auckland... Wellington is fun and you could get jobs anywhere. Focus on saving for a deposit over the next few years. Once you've done that the heat will have probably come off the Auckland market and you may decide to move back and buy something at that point... Don't forget to make the most of being 20 something - it's over so quick!

by Colin | 24th Jun 13, 3:48pm 1372045693

The key issue being the same for the majority of young New Zealanders

The ludicrous price of housing in NZ

Poverty for the impoverished

Cash Poverty for the aspiring young middle class

Endless cheap credit combined with pitiful planning all in the land of potential plenty.

by economist | 24th Jun 13, 4:23pm 1372047799

You just can't expect to buy your first home in Epsom or any inner city suburb.

Think about moving out of Auckland. There are a lot cheaper places to go. Rotorua 3 bedroom houses start at around 120k or so. Cheap. Interest on a mortagage, rates, insurance would be around 180 a week. Start somewhere you can afford... dont spend money you dont need to until you finish study (no tv, no mobile phone, etc... people just a generation ago didnt even need these)... When I was at Uni (20 something years ago) I could not have afforded to rent my own place, even while working part time and summer jobs - everyone I knew was flatting or living with parents. Surely you can study at another Uni which offers the same course (Otago?) where rents are a lot cheaper...

by fenderbender | 24th Jun 13, 4:09pm 1372046953

very true. I paid for my undergrad degree upfront by working 2 jobs (and after working in a car factory for a year), but my postgrad degree alone was AU$39,000. Then add the wifes student loan AU$62,000 and we have an epic NZ$120,000 student debt (no living costs included). Combine with 3 kiddies and a mortgage and you need to be making a motza. What we did do, however, was pick somewhat unusual degrees (in demand) and as a result make plenty.

This I think can be the crux of the issue -the need for savvy choices in education, but how does a 17 year old predict global demands 5, 10, 20 years in the future?

by Gareth Vaughan | 24th Jun 13, 4:37pm 1372048647

$200k for a Mt Eden apartment?! How big is it?

by Kate | 24th Jun 13, 7:59pm 1372060785

So the 'plan' is to make up the shortfall in rental income vs expenses of ownership with the student allowance (i.e. other borrowings in addition to the mortgage on the property) in the meantime based on the premise that the (as yet unrealised) capital gains are certain to be there in the future?

by Kate | 24th Jun 13, 9:25pm 1372065932

But this is not your bet - it's your young daughters - and it's not what you're advising her to bet "against" but rather what your are advising her to bet in favour of.

Don't forget - on completion of study (whether a qualification is gained or not - and whether an above minimum wage job is gained or not) the student loan will be deducted at 12% of salary - and that's not counting the fact that the mortgage will also still be there. Sure, there is the option to sell, but then one is renting or facing living at home for longer. And if one can't sell, the top up on the weekly rental might continue in addition to the student loan repayment. And the property value might decrease and interest rates might rise. These are the 'bets' (most of us call them risks) as you say that you have advised on and indeed encouraged through fronting up on the ability to secure the mortgage in the first place.

Hope you're also capable if a bailout is needed.

I think there is a proportion of students these days who take on higher qualifications simply to avoid the 12% salary deduction for undergrad loans based on a starting in the workforce wage. In other words, they keep studying (and subsequently increase the debt) on the 'bet' that with a postgrad qualification the salary will be sufficient to afford that 12% salary deduction.

by Belle | 24th Jun 13, 9:44pm 1372067079

And who is willing to take the bet that student loan repayments will stay at 12% or go up another 2% or 4% or 10%. Good points Kate

by Kate | 24th Jun 13, 10:08pm 1372068532

kimy, this is not about my savings - its about your daughters debt.

by Happy123 | 25th Jun 13, 8:34am 1372106056

Hi Kimy. Great parenting, you've done everything that Elizabeth's parents should have done. Kept her at home to keep costs down whilst encouraging her to make investments. When she's ready to move out on her own she takes a flat mate, which will cover almost all of the mortgage costs. What small risks there may be are far outweighed by the benefits.

The doom mongers are everywhere, I wonder how some of them find the courage to cross the street.

by Kate | 25th Jun 13, 8:43am 1372106593

whilst encouraging her to make investments

No, whilst encouraging her to take on debt

and before such time as she has any kind of secure income as a means to repay that debt. It's plain nuts.

Oh, and it gets worse - as in staying at home she is not making savings - rather she is taking on debt at the rate of $170.00 per week - and ploughing that into an operational loss making 'asset' that she doesn't have legal title to. Bigger nuts.

by steven | 25th Jun 13, 9:10am 1372108243

There are doom mongers, and ppl like myself that look both ways in case there is a drunk driver coming down the one way street, the wrong way.

On the other hand there seem to be ppl like yourself who not only dont look even the one way but put on a blindfold and turn the ipod up full volume and then cross. These of course will also be the big whinners, expecting free healthcare provided when the impact happens...

regards

by Kate | 25th Jun 13, 8:34am 1372106063

Well let's see if I do understand. Your daughter has not bought a 45m2 apartment. She does not directly own the asset or the debt or the potential capital gains. Nor is she free to sell the asset. Rather the asset has been consolidated into a trust structure - yet she somehow contributes to repayment of the debt using that debt which is directly incurred by her through the $170 per week student allowance scheme?

So, to your mind - the debt she is incurring with respect to the student allowance is interest free and hence as a trustee of that trust, you think it's a good deal for the trust to take advantage of this interest free debt in the meantime?

by Kate | 25th Jun 13, 9:14am 1372108449

Well I see I got it right.

Kimy, a rose is a rose is a rose and a debt is a debt is a debt.

Ask Elizabeth whether she would be better off without that debt.

Student loans (interest free or not during the period of study) bite into your earnings at the end of the study - big time.

The most secure of our educated students are the ones who graduate without debt.

If you want to be a good parent - buy your daughter the 45m2 apartment outright - let her live in it while studying and pay her course fees whilst she pays her own other living expenses with the money she earns in the part time job.

Your idea of good parenting is a lesson in lemming strategies at a time when the cliff face is eroding further shoreward.

by steven | 25th Jun 13, 9:24am 1372109054

ah but the "clever" ppl are clever until they get caught out, but then someone else pays.

I wonder how common Kimy's plan is, bet its not that un-common.

Which makes a huge moral hazard of the interest free scheme...why am I not surprised someone(s) hasnt figured out a way to take advantage of it.

I know of at least 2 others who as student accountants took out the absolute max debt they could and banked it....after 4 years ie 8 years maxing, they had a tidy interest free lump sum with no payback date.

regards

by steven | 25th Jun 13, 7:28am 1372102085

Yet the bet isnt really a bet, since we live on a finite planet, the population has to be finite, the only Q is how many and when.

Look up the revisiting of to the limits to growth, even their numbers which are optimistic say 2040.

regards

by waymad | 24th Jun 13, 4:18pm 1372047532

In the States this exact phenomenon is termed the 'Higher Education Bubble'.

Like all bubbles, it is driven by factors such as the institutions, guilds, unions, professions, and others who administer and clip the tickets.

What tickets?

Credentialism - the absurd notion that having pieces of paper is a precondition for getting anywhere
Inflation: the notion that experience gained, climbing a ladder thirty years ago, cannot possibly apply Now, so off to school with you and come back with - a Working at Heights piece of paper (should be short-circuited by competenecy assessment, but that only happens in IT which needless to say can see a 10 year old granted an MCSE....the guilds have killed That off everywhere else they can)
Botties-on-seats - the source of a lot of the credentialism, as more botties = more moolah. more tutors, more content, more admin, more assessment, more aides, more more more, and guess who's paying....

And then ya runs into the several Elephants in the room upon graduation....

Employers take a dim view of Credentials beyond a very basic point - Experience counts a lot more. Anything less than a double major or a stonkingly good Masters, and you're right down there with all the Diploma of Fine Arts and the musos.
Debt compounds. This is possibly the worst aspect, but as many institutions like Local Gubmint are equally ignorant of the time value of money, it is perhaps not surprising that the economic mayhem this then causes is somehow pushed down the memory hole when it comes to assessing Consequences, creating Policies, and writng Glowing Advertisements about the Joys of Studenthood.
Entreprenurship needs time, too, for the virtuous side of Compounding to get rolling, so the devotion of 3-4 years away from That possibility fairly much kills it off as an immediate choice: time gone, debt accrued, bad business risk.
Buying into a 2013 Housing Bubble, with AKL house price inflation rattling along at 15% (doubles every 5 years...) but with real incomes stuck at 1973. Median Multiple....

by steven | 24th Jun 13, 4:34pm 1372048440

So you get expotential....(15% doubles every 5 years) and the other elephants are?

regards

by jh | 25th Jun 13, 10:29am 1372112978

"but she lives in Epsom" why doesn't she move to....?

I took a walk through a rougher part of town yesterday and while I did I mused on that (often sited) point.

The thing is that just like people wouldn't want to buy a house beside an eroding coastline, many of these cheaper areas feel physically unsafe for a respectable family.

The one house with a loud stereo (11am) had a rough looking middle aged Maori guy with one tooth sitting outside smoking.. ."bet you've been inside" (I thought). Other houses had cut up lawns with cars on them; one had a green bin un emptied, (on it's side) with concrete in it.

The left whitewash the reality of the bad behaviours of a significant section of the community.

by drelly | 24th Jun 13, 4:19pm 1372047547

Nicely written. But... she's 23 and lives in Epsom. Move somewhere cheaper. My old Mum called that sort of thing... "Champagne tastes with a beer budget".

by steven | 24th Jun 13, 4:31pm 1372048283

Where to start,

a) Look at your future and the assumptions underlying it, the big one is energy and you wont have enough.

b) Forget thinking about 2.5 kids, even 1.5 will seem un-affordable, plus there are simply too many on the planet eating it out....think per capita...

c) Large dogs have a CO2 foot print of a SUV, I'd suggest you think again, if you want your grand children to have a chance.

d) Mike seems to have his head on his shoulders, marry him....LOL.

e) Avoid taking on debt and see how the next few years unfold......I think its going to be very tough.....and especially emotionally when it dawns on your generation the previous generation(s) have not only used the cheap resources and then some but have left your generation with a lifetime of debt to pay off, if not your chidren by the time they have finished.

regards

by robi | 24th Jun 13, 4:47pm 1372049220

Elizabeth, I think you may perhaps be accustomed to a rather unrealistic assessment of 'needs'.

Health insurance is quite definitely not a need.

Living in a 'place of our own' is not a need.

Car ownership in a metropolitan area? maybe not

And living in Auckland is definitely not a need.

There are many well built affordable homes in other parts of the country where a mortgage will cost you less than you pay in rent now. You can even get the 1/4 acre!

You may have limited your options for now because you have chosen to study in Auckland, but if you take a look south there is a country full of opportunity for the future.

by steven | 25th Jun 13, 7:23am 1372101819

Living in a city is a need depending on the work you want, or even if you want work.

My wife could easily get a job in the country, but I couldnt. In fact there are only 2 places we can live in NZ, Wellington, or Auckland.

regards

by Basel Brush III | 24th Jun 13, 4:49pm 1372049399

Wonderful way to expose the plight of many in the Gen Y and slightly older group.

What you need is a REVOLUTION!

You have the natural expertise to start a blog to capture all of those 18 to 30+ year olds who cannot hope to beat the system that is controlled by the 'suits' and 'blue-rinses/red-necks' You have the social media that makes your task so much more manageable. Get to it.

As a 70+ who has had an easy ride to prosperity I would recognise that if you can get your group enrolled and voting as a block in 2014, you could change the world (or at least the little bit we have here)

by Von | 24th Jun 13, 6:56pm 1372056988

So true Basil Brush III - if you can help organise these young people I'll be with you - at 66 years of age. They need to vote and remember it is their right in a democratic society to vote for a better world for themselves and hopefully their children. Its a very sorry state of affairs and to me there doesn't seem to be many hopeful answers out there.

Having said that sometimes choices made are not good ones when it comes to University Degrees. I have a 18 year old granddaughter who is just about to start "college" in North America and is going to study (wait for it!) Linguistics and Drama - what the hell is she going to do after she has finished that! They seem to me to be hobbies to study not something for a future career unless she is brilliant at both (and as a grandmother I shld say she is!!!) and she becomes a translating Oscar winning actress! I despair that my son hasn't tried (probably has but unsuccessfully) to dissuade her from her choices. Oh well that is what being young is about I suppose. Hope - and we all had it when young. Today that hope is dashed beyond repair in some ways.

Good luck to the author of this article - you sound like you have a good brain and you will come through.

by hauraki | 24th Jun 13, 5:49pm 1372052971

if "u can't afford it" is the only advice your dad gave u, he failed u. even if ur dad didn't save for ur college (like most asian parents do) he sure didn't prepare u for the real world.

u also failed urself by blindly go into debt and pursure a postgraduate degree with little learning potentials. u might have already found u a job if u started with a bachelor and few years of experience on ur resume by now. u done urself a bad deal.

and u r way to young to worry about buying a house and having 3 kids. save for 5 years and look outside auckland central and u'll be in a much better position.

by scarfie | 24th Jun 13, 8:49pm 1372063745

Woah go easy on the text speak on here buddy, too hard to read.

by Belle | 24th Jun 13, 6:54pm 1372056840

Keep the faith Elizabeth. Things go up and things go down. In the early 80s farmland was priced outrageous. By the late 80s it had collapsed and I was in like flynn.

Your 36k of debt may be dealt to by inflation, and in 10 years it may be similar to 3.6k of debt.

The point is things change, and what may seem to be impossible now, may be very possible tomorrow.

But I do have similar fears for my similarly aged children. The cost to simply play life right is just too high. As an example, I remember when one could not afford the car rego, you simply drove without one until you could. No point doing that now.

GST, income tax, ACC, terminal tax, rates, provisional tax, fuel tax, fines (which I sometimes think are just a tax), parking costs, and of course education costs and fees. I could go on. Yes you are up against it, as we all are nowadays. The great bureacracy has to be paid for. I dont know the answers, but I am glad you are asking the questions Elizabeth.

by gibsont | 24th Jun 13, 8:00pm 1372060847

Looking forward to more articles like this geared towards a younger audience (and women!). I would like to see Interest.co.nz transformed into more of an all-encompassing personal finance website.

by scarfie | 24th Jun 13, 8:51pm 1372063891

Heck next you will want the site geared towards Maori, Asian and Homosexuals.

by raf | 25th Jun 13, 10:19am 1372112368

Amanda has been writing regularly on this topic for a number of years. Check out her past posts and read her book :-)

by gibsont | 25th Jun 13, 10:35am 1372113337

I realise that, and I'm a regular reader of her 'Take Five' articles, but it's nice to have more than one piece to read a day!

by Urcheon | 24th Jun 13, 10:34pm 1372070067

Hi Elizabeth,

Things will be fine. You are 23 and from a reasonably well off family. You're worrying too much.

10 years ago I used to bore my mother with how her generation had ruined any chance for mine to own a home, blah blah.

Am now living in a villa with another rental a couple of suburbs away. I'm 43 with a lovely wee lad of 9 weeks. Your time will come so don't sweat it. Save some money but most importantly enjoy your life - you only have one.

Get Kiwisaver, pay your loan and don't get a credit card. Give yourself 5-7 years and then come back at 30 and tell us how you are getting on. Maybe get into "communication", it's called work not play.

All the best

by Brendon | 25th Jun 13, 6:31am 1372098694

Thanks for the article Elizabeth. I wont give you personal advice I'm sure you will be fine. What I am interested is your thoughts about where we are at and where we are going as a country. It is a truism that the young are the future. So it would be helpful to have the discussion with your generation on where we are going.

I have been reading Belich who writes very clearly on where we are at, from an academic history viewpoint. But his New Zealand series books are 12 years old now. So we need some more up to date social commentary.

by kowtow | 25th Jun 13, 9:49am 1372110591

I read the article wondering what occupation she studied for and why she 'd take on debt for said job.

The bio at the end said it all ,Journalism,not known for good pay. So why take on the debt in the first place? Far too many people are wasting their time and money doing tertiary courses in the education industry that are un necessary for the occupatin itself and which will never pay sufficient enough to pay the massive debts incurred.

She was "bought up" ,so here's a post grad journo who doesn't know the difference between the verbs to bring and to buy. No wonder she's struggling.

by Gareth Vaughan | 25th Jun 13, 11:02am 1372114920

Occupatin? Sorry but after reading the last sentence of your post a saying about pots and kettles came to mind.

by kowtow | 25th Jun 13, 11:38am 1372117107

Touchy Gareth? There's a world of difference between a typo from a poster and a ballsup by a journo post grad.

And a hell of a lot of journos make the same mistake.

Pot ,kettle? Suck it up. As Cpl Jones used to say "They don't like it up em".

by jh | 25th Jun 13, 10:38am 1372113528

People are saying we should do what Asians do... do we assume immigration has put up house prices (as the Savings Working Group does)?

"On other government policy issues, SWG recommendations include:

- A much more strategic and integrated approach to policy generally.

- Serious consideration of the impact of the level and variability of immigration on national saving, and the impact that this might have on the living standards of New Zealanders. There are indications that our high immigration rate has pushed up government spending, house prices and business borrowing.

http://www.treasury.govt.nz/publications/reviews-consultation/savingsworkinggroup/pdfs/swg-report-jan11.pdf

by Patricia | 25th Jun 13, 10:43am 1372113820

Three very good web sites Elizabeth.

http://www.simplesavings.co.nz

www.thesimpledollar.com

http://www.cheapskates.com.au

Set goals and then just budget Elizabeth. Then refine and refine and refine that budget. It has to be a life long habit. Always think "how can I do that better". You will get there.

by Gareth Vaughan | 25th Jun 13, 11:06am 1372115179

And this one ain't bad either. Here's our calculators page, for example - http://www.interest.co.nz/calculators

by Patricia | 25th Jun 13, 5:26pm 1372138017

Gareth I wasn't inferring this site wasn't a good site. I do think it is but the ones I recommended are for a completely different purpose. Dear God I do seem to have a knack for upsetting people even when I don't intend to do so.

by Gareth Vaughan | 26th Jun 13, 10:03am 1372197800

No worries Patricia, you didn't upset me. I was just adding to your list as our calculator page is quite useful. Cheers.

by Stephen Hulme | 26th Jun 13, 10:20am 1372198822

And the attributions for a job well done just won't abate - thanks to Chalkie.

by ngakonui gold | 25th Jun 13, 12:08pm 1372118892

Plenty of people on the dole and other benifits have already achieved 75% of your dreams.
Their stationwagon is a subaru with a wide exhaust,their dog of choice is a pitbull and they have 2 or three kids.
Now if only they could get a cheap house.
Oh i know,get Hone to allow his housing policy to cater for all kiwi's and where in.

by Kate | 30th Jun 13, 10:56am 1372546590

Renter’s insurance is essential, just in case I accidentally leave a scented candle burning and the curtains catch alight. (No it’s not for atmosphere, it’s to mask the scent of cat urine in our old bungalow.)

I'd get a test done if I were you;

http://www.stuff.co.nz/national/crime/8859159/Toxic-drug-houses-could-rival-leaky-building-crisis