Experts have warned that business owners with needy Generation-Y children should not let their struggling companies suffer while giving cash handouts to their kids. The warning comes as new St George Bank research shows that 62% of Generation-Y still expect their parents to provide financial support, including free rent, assistance in buying a house and paying for at least part of a wedding.
But the Mum and Dad bank is about to close. While 72% of parents have provided money for Gen-Y kids in the past, presently just 6% are providing assistance to their children as a top priority and 48% say they are focused on savings.
Andrew Moore, general manager of St George retail bank distribution, says that businesses owners must take a harsh stance when it comes to protecting their businesses in the downturn.
“You have parents who are running businesses but finding they have to redirect financial support towards businesses and not their children. But being able to say “no” to their Gen-Y kids can become part of keeping them afloat during this time by teaching finance skills.”
Bernard Salt, demographer with KPMG, says that baby boomer parents are beginning to question whether finances would be better served in their own endeavors, such as superannuation accounts or a business.
“Their superannuation has now plummeted and they’re starting to query whether their money may be better in their own interests, in super or a business, to protect their financial security.”
“When the chips are down, parents have moved into survival mode. They were very happy to support the Gen-Y lifestyle, but baby boomers are starting to say they should be redirecting their finances to themselves.”
Paul Brennan, principal of Sunshine Coast law firm Brennans Solicitors, has worked with several clients who have Gen-Y children asking to be helped out of financial turmoil.
But he says business owners must be resistant to such demands in favour of helping their businesses stay afloat.
“A lot of businesses are struggling and I think they really do need to remember that cashflow is king. Having kids in this age group myself, it’s difficult to say no. I wish best of luck to every business owner who can resist their children’s demands.”
The new St George research shows that 45% of Generation Y expect financial assistance for one-off expenses, 44% for all or part of a wedding, 43% for a “safety net” and 40% for a house or deposit. Additionally, 24% say they have never had to budget or save funds.
Moore says that the downturn will act as a reality check for Generation-Y, and provides an opportunity for baby boomer parents to communicate how to act financially responsible.
“The other aspect is that we have half the parents saying they’re no longer willing to support financial support, so the Gen-Ys will have to quickly do that themselves.”
Salt says that Generation-Y is “a little like a domesticated wild animal” and that they are likely the last generation to experience uniquely high levels of prosperity.
“Along comes the GFC [and] they have to go into the jungle and fend for themselves. I’m not sure we’re going to have another 18-year bull run, and I think that was the issue with Gen-Y. There was such a culture of entitlement that I don’t think we’ll see for a long time.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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