Gen Z advice: Focus on finances but don't create a 'financial hangover' for your 30s

Eva Osborne

Personal finance expert Eoin McGee is advising members of Generation Z to focus on their finances to some degree, but not too much to the point where they create a "financial hangover" for themselves in their 30s.

Speaking on Today with Claire Byrne on RTÉ Radio 1, McGee clarified that he does not want any people in Gen Z (people aged 13-28) thinking they are "doomed".

"You're not. It's just great if you can get ahead in those years, because it does lay foundations. And I think your 20s in particular are a really important time in your life," he said.

"[It's] where you discover who you are, you make your big mistakes, and you try to decide what direction you want to go.

"That's really important and it's not about trying to suck the life out of that by trying to concentrate in your finances all the time. You still have to do all that stuff, and it's still really important, but don't create a financial hangover for your 30s either."

McGee said when he was doing to the How to Be Good with Money show, it was "really unusual" to see people in their 20s/30s in "any type of plus figure at all" due to car loans and personal loan debts.

"Where they get car loans and personal loan debts going into their 30s, they're sitting there going into their 30's in a position where they're saying: 'Okay, not only do I have to try and start saving, I have to get back to zero before I can start saving'. And they are on a financial treadmill."

The 'squeezed generation'

McGee said it is a difficult period for young people, because they are on low money while trying to live away from their parents from the first time.

"You might be trying to buy a house. It is really easy to get into that position where you owe money," he said.

"And actually, even when you mention buying a house, this is why I want to talk about this today. Because if you think about it, we always talk about the squeezed middle, right? And the squeezed middle are suffering, and there's people who are suffering even harder again than that.

"But this is a generation that I think has lost out, it could be lost out completely, right. Even the gender pay gap in this, females are earning €60 per week less than males.

"There's a pay gap already, and usually where the pay gap is explained away by the fact that sometimes mothers take time out of work and therefore they jump back on the career ladder a bit later.

"The average age of a person having a baby in Ireland is 31 and a half years of age now, so that's not affecting Gen Z, but yet there's already a pay gap.

"Also, if you look at the squeeze that's on them, in 2000, in the year 2000, the average age to buy a house was 29. I saw research recently that shows it's 39 years of age."

Getting ahead by saving

McGee said that, in his opinion, if Gen Z members put 10 per cent of their earnings away, they will cover the day-to-day stuff and any surprises life throws at them.

"15 per cent you're starting to get ahead, 20 per cent plus, and that's the real key one. Get above 20 per cent and you are now creating real long-term wealth.

"Let me just show you the difference between the pain you're going to feel later if you don't do it today. A 25-year-old today sits down, two mates, right, let's call them Salt and Pepper. Salt and Pepper sit down they're two mates and they both decide, I want to have €1 million in my pension pot when I retire. High ambitions. Yeah, €1 million, now put that in perspective.

"Today the average person in Ireland retires, depending on what research you look at, with somewhere between €100,000 and €120,000. Nowhere near enough, but that's the average pension pot today.

"But the two 25-year-olds, Salt and Pepper, say I want €1 million in my pot. Pepper says, I'm going to start today, sits down with a financial advisor and gets advice and is told, yeah, you need to put €500 a month into that. And Salt says, oh, I'll do it next year, and then next year, then next year. And Salt wakes up on their 35th birthday and says, I want the same €1 million.

"And they sit down with an advisor, they need to put €1,000 a month in, twice as much as Pepper did. So just delaying that 10 years alone, it's about compounding, it's just about making it, and you ask me, how much do I need to do to put away?

"Anything is better than nothing. Avoiding the debt, but we do have a problem with putting away money for the future."