The largest generation in the world may not afford to retire

Millennials, and Generation Z have a very different approach to investment priorities, compared to their parents and grandparents.
Millennials, and Generation Z have a very different approach to investment priorities, compared to their parents and grandparents.

South Africa's retirement age is not currently set by law, and companies can choose to retire employees as young as 55. This means that an individual could have as little as 35 years to save for a retirement that could last almost as long as their working career.

Tyrone Coetzee, a Wealth Manager at South African based Private Client Holdings, told us Millennials, and Generation Z have a very different approach to investment priorities, compared to their parents and grandparents.

He shared some of his findings with us:

"Millennials and Gen Z have seen the way their parents live," Coetzee says, "often locked into careers and grueling work cultures as a means to afford possessions and assets such as property, cars, and to pay for children’s education, and eventually funding their own retirement – in many cases still finding themselves in financial difficulty."

"If you speak to a Millennial or Gen Z many of them will tell you that this not a way in which they would like to live, as they seek more meaning and flexibility in life – spending their disposable income and savings on experiences, travel, leisure activities, self-improvement and health, rather than building up physical assets."

Where does this leave retirement savings?

Coetzee says that in the years where previous generations were in accumulation phase, Millennials and Gen Z will be off accumulating life experiences.

And while a lifestyle of flexibility and experiences may trump material possessions for these two generations, it comes at a cost when you consider the total loss of earnings over the span of a working lifetime.

"Work flexibility for the pursuit of life experiences means that the opportunity for long-term career progression, and the resultant pay scale escalation, might not be as aggressive or as important for Millennials and GenZ. Also, disposable income will more than likely be used to fund travel, self-improvement and leisure goals," he says.

Must read: Is your family poor, middle class or rich? Take this test and find out

The importance of long-term savings goals

Coetzee says that parents need to allocate time and energy to improve financial literacy in households from a very young age, in an attempt to cultivate the habit of saving money and being savvy when allocating these savings to asset classes.

He offers the following advice for parents:

  • Be inclusive with your finances and your investment planning.
  • Be open to hearing about how your children perceive life and how they want to live it, but be stern about financial implications.
  • Teach them about habitual savings techniques, about global asset classes, about currency depreciation, about prioritising, about education costs, the financial commitments that you undertake by having a family, the effects of inflation, the amount of capital required to sustain a thirty-year period of providing income.

Find out more about family finances here

Physical property less desirable

Coetzee says that in the future these youngsters will have a different attitude towards owning physical property, as they will likely want to have the ability to move about freely. He explains that the reasons for this are two-fold – firstly it is increasingly difficult to get onto the property ladder because of high entry prices for young professionals;

"Property ownership may will still be a desire, but the type and size of property ownership is almost certain to change. Smaller, lifestyle lock up and go type properties will be more attractive."

Flexible work more common 

The future will almost certainly allow for remote working conditions with global reach, which will empower people to travel and work anywhere in the world, he says.

"The concept of working whilst traveling and experiencing life before "retirement age" is upon us and it is just a matter of time before it accelerates with the advent of technology – what an exciting time to be alive."

However, it will come at a cost if one is not diligent about saving first.

Must read: Are you paying your nanny a living wage? Probably not

Parents must teach their kids to save

This means they will battle to find the extra disposable income needed to fund retirement if they leave saving for their retirement until later years, he cautions, adding that the answer is for these generations to start saving from a younger age.

He says it is the responsibility of the Baby Boomers and Gen X, as parents and grandparents, to try assist where they can to educate on this matter.

"Parents need to teach their children how to budget effectively by setting goals and objectives that have to be prioritised. Remind them that long term savings should be a priority in order to minimise the pressures of funding retirement capital shortfalls at a later stage," he suggests. 

Chat back:

Share your story with us, and we could publish your mail. Anonymous contributions are welcome.

Compiled for Parent24 by Elizabeth Mamacos 

Sign up for Parent24's newsletters.

Read more:

Are you paying your nanny a living wage? Probably not

Is your family poor, middle class or rich? Take this test and find out

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For 14 free days, you can have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today. Thereafter you will be billed R75 per month. You can cancel anytime and if you cancel within 14 days you won't be billed. 
Subscribe to News24
Voting Booth
A Section 89 panel headed by former chief justice Sandile Ngcobo found President Cyril Ramaphosa has an impeachable case to answer on the Phala Phala scandal.
Please select an option Oops! Something went wrong, please try again later.
Ramaphosa should do the honourable thing and immediately resign.
24% - 1208 votes
Ramaphosa should follow due process and submit himself to an impeachment hearing.
29% - 1488 votes
Ramaphosa should fight the findings in court and keep his job at all costs
47% - 2363 votes
Rand - Dollar
Rand - Pound
Rand - Euro
Rand - Aus dollar
Rand - Yen
Brent Crude
Top 40
All Share
Resource 10
Industrial 25
Financial 15
All JSE data delayed by at least 15 minutes Iress logo
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.