Money for nothing

They're Generation Y - as in why save? Young, cashed-up and carefree, they're turning their back on the recession and hitting the shops instead.

While economic growth declines and unemployment rises, Generation Y - roughly speaking those born between 1980 and the mid-90s - is still spending money, and lots of it.

Teens spoken to by the Herald on Sunday confessed to spending most, if not all their earnings or allowance on clothes, makeup and partying.

One emptied her savings account of the $300 she had put aside so she could buy a pair of $350 shoes.

Despite worldwide economic turmoil caused partly by over-borrowing, others displayed a "buy now, pay later" attitude to money, with little if any cash saved.

Figures from credit agency Veda Advantage show Gen Y was the age group responsible for most credit card inquiries last year, ahead of the Baby Boomers and Generation Xers.

Veda's New Zealand director John Roberts said more people of all ages were turning to credit cards to stave off other debts.

A study by Otago University student Sarah Penman and senior marketing lecturer Dr Lisa McNeill, showed young consumers made frequent, non-essential purchases and saw them as "deserved" and a "reward" for studying or working.

Economists warn their frivolous ways could damage their financial future - and New Zealand's.

Bernard Hickey, of money website interest.co.nz, dismissed Gen Y as "selfish spendthrifts".

"For whatever reason they believe you can pay now and spend now and someone else will fix it, but the only way to fix it is not to spend."

New Zealand Institute of Economic Research economist Shamubeel Eaqub said our national debt and liabilities were already $167.7 billion and today's spending habits were placing huge pressure on future generations.

"We have liabilities that equate to 95 per cent of our economy," Eaqub said. "It has made us vulnerable. We need to keep borrowing money to just keep up with the loans."

Other economists said Gen Y had only known economic prosperity and were ill-equipped to handle the recession.

Gareth Kiernan, managing director of economic forecasters, Infometrics, said they had yet to live through an economic downturn, such as the Depression or 1987 Stockmarket crash.

"Until it affects them personally they just keep on going."

Kiernan also said Gen Y had a misguided expectation they would start adult life with the same standard of living their parents had taken years to attain.

Author Sylvia Bowden believes the problem is caused by teenagers having their "wants and needs confused".

Her new book How to Stop Your Kids From Going Broke! aims to encourage parents to educate their children about the value of money.

Bowden was inspired by the tales of economic woe she encountered as a life coach, budget advisor and counsellor. She had seen "time and time again" parents getting into financial trouble after agreeing to be guarantor for Gen Y children locked into high-spending ways.

"It often doesn't matter what the level of income was, most times it was the bigger the income, the bigger the debt."