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Getting to pay day is a ‘fight to the finish’ for young Aussies struggling to save

Eating out with mates might brighten your day, but doing it too much could stifle your savings' progress.

Eating out with mates might brighten your day, but doing it too much could stifle your savings' progress. Photo: Getty

Many Australians have been hit hard by the cost-of-living crunch, but the younger generation may be feeling the worst of it due to a lack of financial literacy.

Research conducted by digital bank Up as part of the launch of its new financial management system, Hi-Fi, found more than half of young Australians are struggling to save money.

For Gen Z, 46 per cent admitted most of the struggle comes from overspending on ‘the good life’, such as eating out and shopping.

Melbourne-based project co-ordinator Eliza Killey, 25, works full time and lives with three housemates.

Eliza Killey knows she has to make some sacrifices in her social life to be able to afford essentials. Photo: Eliza Killey

But she told TND she still struggles to save money while trying to balance a social life with the rising cost of essentials such as groceries, and has a self-enforced limit of two dinner outings per week to catch up with friends.

Although her friends in country towns are already buying houses, Killey said she and her city mates have given up on the prospect of home ownership.

Just covering expenses until pay day is a “fight to the finish”, with Killey considering herself among the 28 per cent of Gen Z who told Up they rarely have money left over before pay day.

“I feel like every time I go down [to do my grocery shopping], you’re spending like $50 just for a couple of meals,” she said.

“So it’s a bit of a struggle, but it’s just one of those essential things that you have to put above, say, going out with your friends, or all that sort of stuff.”

Young Aussies’ financial literacy needs work

Gen Z reported having a significantly lower savings’ cushion than Millennials and Baby Boomers, with 24 per cent of Gen Z telling Up the biggest unexpected expense they could cover without going into debt was ‘losing their phone or laptop’.

About one in six Gen Z said they don’t have emergency funds.

In contrast, 29 per cent of Baby Boomers and 28 per cent of Millennials said “they could lose their income for several months”.

RMIT University associate professor of finance Angel Zhong put the disparity down to two main factors: Older Australians have had more time to accumulate savings, and the younger generation lacks financial literacy.

More than one-third of young Australians don’t feel confident in their financial literacy, according to Allianz Australia research published in April.

Financial education may be carried out in maths, humanities and social science lessons in Australian classrooms, but Zhong said the topic deserves to be a standalone subject.

“The extent to which schools are teaching financial literacy is quite ad hoc,” she said.

Essential tips to save money

With Up data showing younger people are struggling to add to their savings but are still spending big on non-essentials, Zhong said improving your financial literacy is key to getting on top of your finances.

“You [can] start today to budget, to understand your overall financial position … That means you have a clear idea of how you allocate your money so that you become self-disciplined,” she said.

Having short-term (12 months), medium-term (up to five years) and long-term (beyond five years) money goals is also important to encourage saving; for example, you could aim to save enough to buy a car in seven years.

“[By having a] tangible goal that you can work towards, you can actually manage your spending so that you don’t spend excessively in just one category,” Zhong said.

Small steps to help you along could include paying attention to unit prices while grocery shopping, and replacing some fresh produce purchases with frozen fruits and vegetables.

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