Young people: you are probably doing better with your finances than you think

Young people are probably doing better with their finances than they think. As a young adult who recently entered the working world, you might feel you have miles to go before you reach your financial goals, whatever they might be.

 And when you look at your parents, why does it seem like they were better off financially when they were your age? Did they perhaps own property already when they were your age, or never seemed as stressed as you feel about money?

You are not alone in feeling this. According to CNBC’s International Your Money Financial Security Survey, the majority (42.8%) of young adults today say they are worse off than their parents were, while 20.7% say they are faring about the same.

And this is not just perception, it is very much rooted in reality: according to Opportunity Insights Research, only 50% of people born in 1980 grew up to earn more than their parents, in contrast to 90% of those born in the 1940s.

Do not compare your finances with your parents’

“It does not help to compare yourself to your parents. There are macro-economic factors at play that put today’s Millennials and Gen Zs under significant financial pressure, such as global and local political turmoil, load shedding, the cost-of-living crisis, skyrocketing interest rates, wage stagnation and high property and education costs,” Warren Wilkinson, financial adviser and franchise principal at Consult by Momentum, says.

“However, these are all factors outside of your control. It is more constructive to focus on what you are doing right, which is probably a lot more than you think and to put plans in place that will move you closer to your desired lifestyle and not that of your parents.”

Wilkinson says these five signs show that when it comes to navigating your finances, you are probably doing better than you think:

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You understand how interest works and how it can be a force for good – and bad

 You are familiar with the principle of interest and how it can work in your favour or against you. You understand the importance of leaving savings to grow and know about the power of compound interest, where you earn interest on both the original amount invested and the interest already earned.

You also know the interest that accumulates on any amounts you owe can eat into your disposable income and you try and avoid ‘bad’ debt as far as possible. If and when you buy on credit, you try to settle the amount owing as quickly as you can.

You have some form of savings and risk cover

It might not always be much, but you put away a little, as often as you can, towards your savings. You also have a retirement fund in place and while it might be early days, you know that the sooner you start planning for retirement, the better.

You know that loss can result in a financial setback and therefore your valuables or assets are insured. You also have medical aid or a hospital plan in place. Critical illness and income protection or life cover? Give yourself a round of applause – you are ahead of most people your age.

You pay your bills dutifully – and on time

According to the National Credit Regulator, of the 23 million credit-active consumers in the country, over 42% are considered “impaired”, meaning that they cannot live without borrowing and are falling further behind on their debt repayments.

 You are in a much better place financially than you might realise if you can pay all your bills and expenses faithfully, as well as on time.

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Your finances are in a better place now than you were a year ago

Yes, you might not yet be exactly where you want to be in terms of your finances, but if you are in a better place now financially than you were a year ago, you are on the right path.

You have financial goals – and a plan to get there

You know that you cannot reach wealth and success without having clear financial goals, as well as a plan on how to get there.

“If you have goals in mind but are unsure of how to achieve them, it is worth reaching out to a qualified financial adviser. They will help you draw up a step-by-step plan based on what you can afford, that will start moving you closer to the life you desire.

“Then all you need to do is to stay on track and you will soon reap the rewards,” says Wilkinson.