Australia: Crossing the generation gap

If Generation X’ers want to buy their own home in the current market, they are going to have to be smarter than their parents and make their money work for them, according to Paul Northey, Navigator’s General Manager Group Marketing and Distribution

"Putting your savings into the bank and expecting to save a deposit for a home is doing it the hard way. Generation X’ers, those born between 1961 and 1976, need to seriously consider establishing a robust savings strategy with strong growth potential, for example a managed fund with regular salary deductions will ensure savings are regular and disciplined," says Paul.

"Utilising managed funds is an excellent way to explore some of the wealth creation opportunities currently on offer in the market. Making your money work for you in a volatile market can actually dramatically reduce the amount of time you spend saving for a deposit."

While the Generation X’ers are the most educated group ever, their financial problems stem from education debts, record levels of credit card debt, and for those in the housing market, inflated house prices in many Australian cities.

Australia’s median house price is now more than $275,000, an increase of almost 70 per cent in five years, while the same time frame has only seen wages rise by just over 25 per cent.¹

With house prices seemingly out of reach it is important Generation X’ers don’t start emulating the traditional baby boomers habits of spending all their salaries on material goods instead of saving for future financial needs.

Generation X’ers would do well to use this time of high house prices, climbing debt, and interest rate increases to invest disposable income within managed funds so they are on the wealth creation escalator – and with the discipline and application will be able to afford a home deposit.

"There are many thoughts over what house prices are going to do, with predictions of boom busts and the emergence of a more realistic homebuyers market. My advice would be to make any money you have work for you - don’t just put your money in the bank. It’s important to invest it and let it really work for you while you wait to make your next financial move," said Paul.

Looking at a Navigator Personal Investment Plan (PIP), and investing $20,000, could potentially make you $14,364 in eight years.²

"In anyone’s books, this profit is a lot of money to gain simply by investing your money in the right place," comments Paul. "Even if you only have only a relatively small deposit you can watch your balance grow in a tailored investment product."

"A structure such as the Navigator PIP helps investors to growth their wealth by making it easier to move quickly between funds and sectors so they can generate the maximum possible returns for themselves," said Paul.

Of course, Generation X is well ahead of their Baby Boomer counterparts in one area – Superannuation. Already their average superannuation balances range between $13,000 and $40,000³. And, while these figures seem relatively low, they’re a strong base to grow on, using personal contributions in line with your employer’s superannuation contribution.

A Financial Adviser can help tailor a financial plan geared specifically for Generation X’ers looking at growing their financial wealth so that they too can enjoy the feeling of owing their own home.

-ends-

^{1Media release – Average Families Can’t Afford Own Home: New Research, Australian Council of Trade Unions, February 2004.}

^{2This comparison selected Navigator funds at random. As this comparison relates to fees, a constant return of 7 per cent per annum was applied to all funds and any tax impact was ignored. Entry fees were applied at the published full up front option. In reality this may be reduced. A selection of different funds, or switches will result in a different outcome.}

^{3S.Kelly, Forecasting wealth in an ageing Australia – Table A1 ‘Estimated average family wealth by asset and age 2000, National Centre for Social and Economic Modelling (Natsem), University of Canberra, June 2003.}

For further information, please contact:
Simon Morgan, Group General Manager Public Affairs
(03) 9829 8892
0407 966 632

Notes to editors:

• Aviva Australia is a group of two specialist financial services companies: Navigator and Norwich Union Life Australia Ltd. Portfolio Partners, the Australian funds management arm of Aviva plc, is a sister company. Through these companies we provide products and services in the areas of wealth creation, wealth management and wealth protection for more than 300,000 customers throughout Australia.
• Globally, Aviva Australia is part of Aviva plc, the world’s seventh largest insurance group, the largest insurer in the UK and one of the top five life companies in Europe. Aviva was formed in May 2000 through the global merger of CGU plc and Norwich Union plc.
• Aviva is the world’s seventh-largest insurance group and the biggest in the UK. It is a leading provider of life and pensions products to Europe and has substantial businesses elsewhere around the world. Its main activities are long-term savings, fund management and general insurance. It has premium income and investment sales from continuing operations of A$66.08 billion, and more than A$472 billion of assets under management (as at 1 January 2004). The group has more than 59,000 employees and 25 million customers worldwide.
• The information in this document reflects Navigator Australia Limited's ('Navigator’) understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. The information is not, nor is it intended to be, comprehensive or a substitute for professional advice on specific circumstances. The securities advice or information given in this document is of a general nature and has not taken into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision on the basis of the advice above, a prospective investor needs to consider, with or without the assistance of a professional adviser whether the advice is appropriate in the light of their particular investment needs, objectives and financial circumstances.
• Applications to invest in a financial product issued by Navigator or any of its related entities must be made by completing the application form attached to the applicable Product Disclosure Statement ("PDS"). A PDS is available from Navigator or your financial adviser. Investors should consider the PDS before making an investment decision or deciding to continue to hold a product.