Young workers are banking on their inheritance. I don’t blame them

It’s an opinion that makes me an outlier among my Millennial cohort, but I’ve said it before, and I’ll say it again: none of us are entitled to an inheritance.

It doesn’t matter if you’re born into exorbitant intergenerational wealth, whether your parents came from nothing and did well for themselves, or even if they help your siblings out at some point, but not you.

Many young Australians feel they’ll need a leg-up from their parents to get on top.Credit: Dionne Gain

Of course, it’s natural to hope for help from the bank of mum and dad, especially if that bank already has more than enough to live comfortably. But there’s a big difference between being hopeful and feeling entitled when it comes to an inheritance. And yet, research shows that this line is increasingly becoming blurred.

The average amount Australian Gen Zers aged between 18 and 29 now expect to inherit is $525,978, according to research from superannuation company Colonial First State, which surveyed 2250 Australians on the topic in August.

For comparison, Millennials aged 30-39 expected to take home $353,526, while Millennials and Gen Xers aged 40-49 expected the most, hoping for $547,667. That’s despite the Productivity Commission reporting the average inheritance to be about $125,000 and the average inheritance age being roughly 50.

Considering we are living through an unprecedented intergenerational wealth transfer and will see Boomers leave $224 billion of inheritance behind every year between now and 2050, and the fact that property prices stubbornly remain at record highs, it’s little wonder so many people are now desperately hoping to get left something in the will.

There’s a growing concern that those born between 1996 and 2012 will be the first generation to end up worse off than their parents.

But there’s a big snag in these great expectations. In addition to the fact that many members of the Silent and Boomer generations have done better for themselves than previous generations, they’re also living much longer.

As of last year, Australians older than 65 are now spending more money than any other cohort of the population – increasing their spending in cost-of-living basics such as groceries, utilities and health insurance, and at the same time, spending more on the finer things in life like travel and dining out.

And it’s this quality of life among older Australians, when set against the seemingly relentless grind that younger Australians are experiencing, that’s causing so much generational tension.

Even worse, it’s leading to a fundamental shift in mindset among younger people. As a survey from Stake published last month shows, 55 per cent of Gen Z and 49 per cent of Millennials now believe that what you inherit is more important than how hard you work.

Of course, this isn’t new. You don’t even have to go back a full century to find a time when it was the family you were born into and the size of inheritance that predicted your success over your intelligence and work ethic. But a lot has changed between then and now (hello antibiotics, the internet, air travel, remote work, parental leave, and Medicare).

So this backslide in mindset from younger people begs the question, are we raising a generation of financial nihilists who no longer see money the way that their parents do?

With the oldest members of Gen Z set to turn 30 next year, there’s a lot for them to be worried about. Aside from growing up amid the Global Financial Crisis and a climate crisis, and being the first generation to have just about always had social media and immediate access to the internet, there’s also a growing concern that those born between 1996 and 2012 will be the first generation to end up worse off than their parents.

As the e61 Institute noted in its recent report, Will young Australians be better off than past generations?, wages have barely increased for people aged under 30 since the global financial crisis, with the majority of income growth instead going to those aged 40 and over.

This lack in wage growth gets even worse when you consider the fact that higher education costs have risen by 30 per cent over the past decade and younger workers are carrying much of the income tax burden that’s arising from bracket creep and an ageing population.

With such a Sisyphean future, are we really surprised that Gen Zers have less in savings, not only because they’re earning less but because they’re spending more? After all, if you were working hard for years on end, barely keeping your head above water, and there being no prospect of a material reprieve any time soon, wouldn’t you treat yourself to a holiday or some new clothes?

But here’s the thing: for all the downsides, and there are many, Gen Z has many positives, too. Compared with previous generations, it has the highest level of education, the highest workforce participation rates, and better gender balance.

And speaking of balance, unlike my Millennial cohort which is perhaps best known for our record rates of workplace burnout, younger people have a much better understanding of work-life balance than any other generation.

Outside work, Gen Zers are also less likely to drink, take illicit drugs or break the law, and are more aware of the importance of physical and mental health.

Gen Z workers might be pessimistic about money, but they’re likely to earn more over the long run.Credit: istock

And financially, all of that time on smartphones means that they’re much more savvy with investing, and are getting onto that financial ladder earlier and in higher numbers than any generation before them.

Perhaps the best news, though, is that a particularly cringey adage applies perfectly here: according to the e61 report, good things do indeed come to those who wait, with Gen Zers still on track to earn more across their lifetime compared with their parents, but at an older age and in different ways.

For these young people, wealth will come from a mix of wages, investments, housing wealth and, you guessed it, inheritances. As to what that inheritance will look like and when it will arrive is something you can’t guarantee, and should never demand.

Victoria Devine is an award-winning retired financial adviser, a bestselling author and host of Australia’s No.1 finance podcast, She’s on the Money. She is also founder and director of Zella Money.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their personal circumstances before making any financial decisions.

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