Coronavirus: Young people optimistic about their finances just as Covid-19 poised to strike

Wednesday, 8 April 2020

Just months before the fight against Covid-19 devastated the economy, a Massey University survey found three quarters of people aged 24-28 expected their money lives to get better in 2020.

A quarter of those involved with the Westpac Massey Financial Education and Research Centre at Massey University study, which has been running since 2016, felt the next 12 months would see their financial lives get 'a lot' better.

'There would have been a big dent to expectations of future financial situations since then,' said Pushpa Wood, director of the centre.

The longitudinal survey was designed to find out how young people learnt about money management, but it has provided an insight into pre-Covid-19 optimism, with surveying taking place in late 2019.

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Wood, who runs the project with fellow academics Claire Matthews and Michelle Reyers, said the team would look to carry out another survey during the lockdown to find out how young people's expectations had changed.

After the global financial crisis, Statistics New Zealand identified six impacts on the labour market: people worked fewer hours, the number of jobs available fell, unemployment rose, more people went into study, there were fewer, and smaller, wage rises, and people held onto their jobs tenaciously leading to labour market turnover slowing.

But identifiable within the jobs statistics after the global financial crisis was the disproportionate impact of an employment crisis on younger workers.

A 2013 paper from AUT academics Gail Pacheco and Jessica Dye noted the rise in the number of young people not in employment, education and training in the years following the crisis saying they competed for fewer jobs with older, more experienced workers.

When the Massey study began the young people participating were aged 18-22, either still students, or early into their careers.

The other pre-coronavirus phenomenon that had likely changed was young people's engagement with their KiwiSaver schemes, Wood said.

Though most had KiwiSaver accounts (90 per cent), were contributing (80 per cent of total study participants) and most checked their balance at least monthly to see what it was worth, very few (29 per cent) had compared their fund to other KiwiSaver funds on the market.

Few had used the taxpayer-funded KiwiSaver comparison tools on Sorted from the Commission for Financial Capability, or those provided by the Financial Markets Authority.

Before the sharp falls in KiwiSaver account balances caused by the coronavirus pandemic, most had been happy with the way their KiwiSaver had performed (70 per cent), and most expected it to make a positive contribution to their retirement incomes.

'I am not sure whether they would have felt as much satisfaction and comfort with their KiwiSaver provider, and whether they felt it was the right investment for their futures after seeing their KiwiSaver amount going down,' Wood said.

Figures from fund research company Morningstar showed that during March, KiwiSaver growth funds fell in value by 12.39 per cent, and balanced funds fell by 8.95 per cent, though KiwiSaver investors were still in positive territory over the three years to the end of March.

Wood expected that falls in KiwiSaver balances would have set back some young people's home-buying ambitions, and could have prompted more to seek out trusted Government-funded KiwiSaver comparison tools, though young people's most trusted source of financial advice remained their parents.

A significant portion of young people were using KiwiSaver to save for a first home, and around half of those who were, and had plans to buy within 2020, 2021, or 2022, had their money invested in growth funds.