Young people overconfident about money

Young people are overconfident about money, a survey says. File pic

Many young people are overconfident about their money management nous and believe their financial skills don't need improvement, a finance expert says.

The comments follow a snapshot of young people's financial attitudes -- part of a Westpac-Massey Fin-Ed Centre 20-year longitudinal study.

It found that 16 per cent of the 165 participants, now aged between 20-24, believed their financial situation would get worse over the coming 12 months.

However, 71 per cent felt they did no need to improve their money management skills.

"I find it a bit of a stretch to believe that most young people know all they need to know about managing their finances," study co-researcher Jeff Stangl, a senior lecturer at Massey University's School of Economics and Finance, said.

"I think there is a tendency with this age bracket to be over-confident about their skills."

The respondents were also asked if they had made any major financial decisions in the past year and, if so, what advice they sought.

Three quarters consulted their parents, 43 per cent discussed the decision with their friends and 49 per cent searched for information on the internet.

Westpac's general manager business and wealth Simon Power said it was concerning that so many young people relied only on the advice of family.

"This is fine if you have financially savvy parents -- but that is not always the case. Bad financial advice can become a debt trap perpetuated by a family environment where poor advice is given.

"Only 6 per cent of those surveyed used a financial advisor before making a major financial decision and not a single respondent used a budget advisor.

"It's clear this group don't proactively seek financial advice or education so we need an ecosystem that makes financial literacy programmes accessible to everyone through schools, workplaces and the community."

Dr Stangl said the two most common major financial decisions cited by the group were changing jobs and giving up a job to go overseas.

"From a parent's point of view it is sad that 44 per cent of these young people are considering going overseas to chase opportunities.

"This is the prime cohort of new entrants into the labour force and nearly half of them think their future prospects may be better offshore."

Key findings:

• 71 per cent feel "in control" of their financial situation and 69 per cent feel good about their money management skills

• 39 per cent are satisfied with their current financial status but 69 per cent expect their situation to improve in the coming year

• 29 per cent had taken steps to improve their money management skills in the past year; of these 45 per cent had discussed money management with parents and 40 per cent had discussed it with friends

• 36 per cent had made a major financial decision in the past year; of these 31 per cent changed jobs, 27 per cent had decided to go overseas and 16 per cent bought a car

• 75 per cent sought advice from their parents, 43 per cent discussed the decision with friends and 49 per cent researched using the internet

• 32 per cent say their financial situation would be improved by lower rent, 26 per cent cited lower food costs and 24 per cent a lower tax rate

• 44 per cent are considering moving overseas in the next two years to improve their financial position