Why uncertain times are the perfect time for young people to start wealth planning

By Yoss Reddy, Head of GCI Health, Employee Benefits and Short-Term

The pandemic and resulting job losses have clearly illustrated why South Africans – particularly younger generations – need to develop a savings culture and proper financial planning.

Studies worldwide are finding significant generational differences in how people approach savings and wealth, with every generation since Baby Boomers becoming steadily poorer. For example, the “Baby Boomer” generation aged 57 – 75 are increasing their share of all wealth, now holding around 50%, Millennials aged 25 – 40 control only about 7.3%.

The generational wealth gap grows

Where generational wealth from parents and grandparents provides a gradually rising standard of living for those fortunate to have it, the erosion of sound financial decision-making across the generations creates a generational wealth gap.

The transfer of wealth through the generations is happening too slowly and may point to trouble ahead for the next generations – Generation Z and Generation Alpha.

At the same time, life expectancy is increasing – in the United States, it has risen by around ten years over the past 50 years. So we are probably safe in assuming that the same trends hold good in other, similar markets, including South Africa’s middle class.

While the younger generations are the largest in sheer numbers, they do not display a savings and investment culture. As a result, they are not accumulating sufficient wealth as a whole to carry older generations as they retire, or, indeed, to retire themselves. And because these younger generations are likely to live longer than anyone who came before them, they are unlikely to have the money to fund what will be a long retirement, something that raises all sorts of unwanted social consequences.

Time to focus on security

Compounding the challenges facing our younger generations are the impacts of the pandemic – where South Africans saw how easily jobs could become redundant and entire industries could be wiped out.

In the face of these growing multi-generational gaps and market uncertainties, we believe that younger generations should be building their future security through savings, investment, and proper financial planning.

Millennials, Generation Z, and Generation Alpha must now move away from chasing get-rich-quick dreams and focus on saving what they can, whenever they can.

People must curb spending on ‘wants’ and set longer-term financial plans with proper budgeting and savings to tide them over, should the unexpected happen.

As a matter of urgency, families should get all their members involved in planning for multi-generational wealth that grows from generation to generation instead of becoming depleted.

Getting started on the wealth-building journey

GCI Wealth is committed to empowering as many South Africans as possible to take control of their finances and grow their wealth.

Our new GCI Educate platform addresses the gaps in financial education, where anyone can learn about money management and wealth planning to benefit them and generations to come.

GCI Educate is supported by GCI’s free financial planning tool Wealthbit, to enable people to put what they have learned into practice. Built to be the world’s first retirement and cash flow planning tool, Wealthbit gives users total control of their financial future.

Armed with their new knowledge and scenario planning, people should then enlist the help of financial planners to advise them on the best approaches to achieve their financial goals. Contrary to what many South Africans may think, financial planners are not for the wealthy – they are there to help people become rich and protect that wealth for generations to come.