Clothes more important than work ethic

Cape Town - For many young South Africans, finding a job is only half the challenge, according to Henry van Deventer, head of business development at Acsis.

The other challenge is to get to grips with, and conquer, some of the thinking that their generation has imposed on them and how this affects their finances.

The current South African unemployment rate is worrying - one in every four adults are unemployed. For individuals under the age of 25, this number is even more staggering.

Given these figures, it is easy to understand why many youths are so focused on finding employment and that the hurdle that follows, namely becoming financially independent and having a long-term financial plan, is often forgotten.
“The current young generation of jobseekers - often referred to as Generation Y, or the Millennial Generation, born between 1983 and 2003 - possess a number of traits that often result in poor savings habits as well as the inability to find their own ‘financial feet’, when compared to previous generations,” says Van Deventer.

“They are often motivated by passion and see themselves as ‘free agents’. If their job fails to engage them, or if they feel marginalised, they are likely to look for another job that will meet their requirements.”

As a result, Millennials do not have the corporate loyalty of previous generations and their average job span is around two years, and dropping.

He adds that Millennials, who have been in the job market for the last five years, tend to have a very disillusioned view of money and wealth, which prevents them from acquiring larger assets.
Millennials find themselves in an environment where corporate downsizing has always been part of their working environment.

“This, coupled with the fact that basic assets, such as homes and cars, are much more expensive than ever before, and that credit has become harder to obtain, makes it not surprising to find that the global trend amongst Millennials is to purchase less ‘hard assets’ than any other recent generation at the same age,” explained Van Deventer.

He adds that Millennials also live in a more socially connected world than generations before them, and surveys have revealed that cellphones are the most important asset to many Millennials in determining their social status.
In a recent Pew Research Centre survey, in which different generations were asked what made them unique, baby boomers responded with qualities such as “work ethic”, while Millennials offered “clothes”.

“Millennials are often tempted to maximise their disposable income on items such as clothes and phones, instead of ‘non-immediate’ items, such as investment contributions. With this in mind, it is also unsurprising to note the very high levels of withdrawals from retirement funds when Millennials change jobs,” said Van Deventer.

In order for the Millennial Generation to change their savings habits and improve their financial well-being, a few of the views that they hold need a wake-up call.
One view that requires a change is their attitude towards corporate loyalty.

“Remaining with a company for a longer period will not only increase an employee’s market value, but it will also increase the knowledge and experience that an individual brings to their next job.  This creates less of a concern for future employers when deciding on whether or not to invest in training and development,” said Van Deventer.

Learning to save first and spend whatever is left over is also a vital behaviour habit to adopt.

“Before spending your salary on lifestyle assets, it is important to maximise retirement savings by saving at least 15% of your gross salary. It is also advisable to put a portion of your monthly income aside as a deposit for your first house or car.”

He added that resisting the urge to cash in your pension fund benefits when changing jobs is the most significant action for to take Millennials.

“If you cash in R30 000 at age 28, you are not just losing R30 000, but also the future growth you would have received on this investment up and until your retirement.”

For example, if a 28-year old had kept R30 000 invested, at an annual growth rate of 12%, it would be worth roughly R2m at age 65.

“Although these behaviours will feel like big sacrifices at the time, they are key stepping stones in the right direction to ensure that Millennials will be able to create lasting financial well-being,” concluded van Deventer.

- Fin24

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