Survey: Gen Y financially savvy after recession

Pip Catherwood says she was offered a credit card in her bank's package for tertiary students, and often struggled to pay off her monthly bill. Photo / Natalie Slade

Young people are more financially literate and responsible with their money after the economic recession, with many shunning credit cards, a new study has found.

The AMP-Colmar Brunton survey found that Generation Y New Zealanders (aged 18-29) were becoming more savvy in their use of savings accounts and KiwiSaver, but still struggled to understand interest rates.

The researchers' Youth Insights specialist Spencer Willis said the message of saving was finally getting through to the younger generation.

"The fact that only one third of Generation Y possesses a credit card, despite the huge availability, shows that this age group is exercising due caution when it comes to their finances."

A third of the 500 respondents did not own or use a credit card. This contrasted with the 14 per cent of 30-44 year-olds who did not use one.

One of those interviewed, 21-year-old Auckland University student Pip Catherwood, said: "These days banks seem to be willing to give credit cards to anyone, especially students, no matter if they have a job or not."

She said she was offered a credit card in her bank's tertiary package, and often struggled to pay off her monthly bill.

The survey also found that one in three young New Zealanders regularly made payments into a dedicated savings account, and half made occasional payments. Forty per cent had more than $1000 in a savings account. But 21 per cent had no savings at all, and 18 per cent were in overdraft.

Around 70 per cent of Generation Y plan to use KiwiSaver to buy their first home, or have considered doing so.

The main reasons for not opening a KiwiSaver account were that people could not afford it or were aiming to pay off debts first.

Mr Willis said that while the commitment to saving was promising, young New Zealanders were much less educated on interest rates, inflation and the role of the official cash rate.

"Young people need to understand the importance of planning for retirement and interest rates, especially when taking out a mortgage.

"It is also vital that young New Zealanders are educated about interest rates, as we hear that they're likely to go up in the coming months."