GOLDEN RULES

Central Leader - - YOUR PAPER, YOUR PLACE -

The idea that the young are feck­less spendthrifts who can’t af­ford homes be­cause of their de­signer lifestyles has been laid to rest.

Trea­sury bof­fin Mark Vink was the killer.

Vink delved into his­toric spend­ing fig­ures, and found that the much-ma­ligned Mil­len­ni­als in fact have higher sav­ings rates than baby boomers did when they were the same age.

‘‘From the baby boomers on­ward, the sav­ings rate of each gen­er­a­tion ex­ceed those of the gen­er­a­tion pre­ced­ing it,’’ Vink found.

It’s not that Mil­len­ni­als can’t af­ford homes be­cause of their sav­ings habits. They can’t af­ford homes de­spite their bet­ter sav­ings habits.

So how have older peo­ple come to see the young as wild spendthrifts? There are a num­ber of plau­si­ble ex­pla­na­tions.

The first is that peo­ple tend to think they are re­spon­si­ble for their own suc­cesses. This is Be aware of your bi­ases Chal­lenge your as­sump­tions Guide, don’t blame, the young

known as ‘‘self-serv­ing bias’’, and is the hu­man ten­dency to at­tribute our suc­cesses to our per­sonal char­ac­ter­is­tics.

We own a lovely $1mil­lion house to­day not be­cause houses were cheap when we were in our late 20s, or early 30s, but be­cause of our hard work and thrift.

That self-serv­ing bias is then bol­stered with ‘‘con­fir­ma­tion bias’’, which is the hu­man ten­dency to recog­nise ev­i­dence that sup­ports our be­liefs, and ig­nore ev­i­dence that con­tra­dicts them. If you are re­spon­si­ble for your own suc­cess, by def­i­ni­tion oth­ers (the Mil­len­ni­als) must be the au­thors of their own down­fall.

Some­thing else may be hap­pen­ing here. Mil­len­ni­als do look a bit dif­fer­ent to my gen­er­a­tion.

They are bet­ter dressed, and have their ears, or eyes, per­pet­u­ally glued to smart phones. Of­ten they have a latte clutched in their fist.

They must be spend­ing more to achieve such lifestyles!

They prob­a­bly are, though only a lit­tle more, Vink’s work in­di­cates. In real terms, the price of clothes has been fall­ing for a decade. So has com­mu­ni­ca­tion. Smart phones are cheap as chips.

The young have swapped al­co­hol of cof­fee. Binge drink­ing among the young has been fall­ing.

I’ll never drop my an­noy­ance at see­ing the young and house­less drink­ing a $3.50-$5 latte a day, but Vink’s work in­di­cates cof­feedrink­ing is not a sign of the youth of to­day be­ing more feck­less than the youth of the past.

And Mil­len­ni­als also earn more than baby boomers did at their age, and are sav­ing more of it, prob­a­bly be­cause they know they have to.

The prices of Mil­len­nial life­style ne­ces­si­ties may have fallen, but the de­posit needed to se­cure a house hasn’t.

Ten years ago a $38,000 de­posit would have got you into the me­dian Auck­land house, with a home loan of $310,000. To­day, it would be a de­posit of $160,000, and loan of $640,000.

Two more things make hard for older generations to in­ter­pret the be­hav­iour of the young. First, peo­ple tend to clus­ter with like­minded peo­ple who en­dorse, rather than chal­lenge, their views.

Sec­ond, we haven’t had the data to open our eyes. Vink has pro­vided it.

123RF/FAIR­FAX NZ

Mil­len­ni­als are ac­tu­ally bet­ter savers than baby boomers were at their age.

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