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What different generations can teach others about debt

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If your family Christmas always includes generational tension during the turkey carving, then brace for the video calls this Easter, when thanks to COVID-19, conversation won’t be about chocolate coins but real ones. Because yes, Boomers know things.

Social research firm McCrindle named the #OKBoomer meme one of the highlights of 2019, but company principal Mark McCrindle (right) says these points of generational disconnect have always existed.

He suggests the vast difference in debt appetite and management between Baby Boomers and every generation since isn’t simply an economic question – it is a moral one as well.

“Many (Boomers) were shaped hearing the stories of the austerity years post-World War II, (even) the Great Depression. That created a culture that was risk-averse: you didn’t lay-buy, you saved, you bought it, you owned it. They were uncomfortable with debt,” he said.

Social researcher Mark McCrindle suggests the difference in debt appetite and management between Baby Boomers and every generation isn’t simply an economic question, but a moral one as well.
media_cameraSocial researcher Mark McCrindle suggests the difference in debt appetite and management between Baby Boomers and every generation isn’t simply an economic question, but a moral one as well.

And yet a YouGov Galaxy poll – commissioned by MoneysaverHQ in partnership with SocietyOne – found 83 per cent of Boomers with existing debt have at least one credit card in the mix, compared with 70 per cent of Gen X and 62 per cent of Millennials.

Nonetheless, the average Boomer credit card debt is just over $6000 – nearly half the $11,500 owed by Gen X Australians. Millennials may have fewer cards, but they owe the most at nearly $13,000.

The percentages suggest that Boomers like credit cards, but they manage that debt far more carefully than younger cardholders. Millennials predict four and a half years to clear their credit card debt, while Boomers estimate half that.

“Obviously (the) emerging generation knows nothing but consumer credit,” Mr McCrindle said. “It’s Afterpay, it’s lines of credit for many consumable items and it’s all tapping a device, so the technology has shifted the attitude to credit.”

He argues that various support structures and the availability of credit have removed the fear of debt and created too much comfort around it.

“We’ve got a generation that starts their economic life in debt because they owe money to the government through their HECS or HELP loan. They’re inculcated into a world of debt before they’ve even started their first day of earning,” he said.

A YouGov Galaxy poll found 83 per cent of Boomers with existing debt have at least one credit card in the mix, compared with 70 per cent of Gen X and 62 per cent of Millennials. Picture: istock.
media_cameraA YouGov Galaxy poll found 83 per cent of Boomers with existing debt have at least one credit card in the mix, compared with 70 per cent of Gen X and 62 per cent of Millennials. Picture: istock.

Conversely, being comfortable with debt is necessary for younger generations inheriting the Boomer dream of a home. One consequence of the average house price ballooning to ten times the average annual income is what McCrindle calls geographic mobility.

“The average renter in Australia stays 1.8 years per home and even those with a mortgage now are staying around seven years,” he said. “Because of their finances, they’re moving more often.”

Despite a hyper-connected age, such frequent movement breeds less connected communities. The original Boomer ideal of a suburban family home for life now includes ‘renovate and flip’ owner-occupiers discarding long-term roots.

“We end up with this disposable society, because everything’s on a contract, disposable, (with a) flip it or upgrade it attitude. That’s not sustainable financially,” Mr McCrindle said.

The coronavirus looks set to make that point, as Millennials experience a global economic crisis first-hand.

“Ultimately it’s the values and the financial worldview that’s really going to set this generation up for long-term financial and life success,” Mr McCrindle said.

Originally published as What different generations can teach others about debt

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