Intergenerational financial gap

by Carol Yip
30 May, 2009

WHAT happens when you outlive your financial reserves during retirement and are not able to work to earn money for survival because of your age?

For those who have children, will you depend on them to take care of you and for those without, would you have friends or relatives who will be kind enough to provide you food and shelter, medication and hospital bills when you are sick? If you don’t have people to depend on, where will the financial support come from?

In this case, financial initiative for retirees from the Government is important. There are announcements by the Government like minimum pension would be RM720 if the civil servant has worked for 25 years compared to receiving 50% of his last drawn salary and the Human Resources Ministry is looking towards a longer productive period as in the retirement age for workers since studies show that people are living longer, family nucleus is getting smaller (with less children) or some may retire single, divorced or widowed. The Government has also spent over RM93mil last year on pensioner healthcare compared to RM1.9mil in 1999 like orthopedic implants, dialysis treatments and hearing aids. Latest benefit is deep brain stimulator for those suffering from Parkinson’s disease. It is evident that government healthcare benefits are increasingly important for both private and public sector retirees

While the Government is also putting in place our social security system to help retirees including the Employees Provident Fund encouraging employees to sustain their savings with the “Beyond Savings” initiative in 2007. But it may not be comprehensive or fool-proof because we don’t even know how long we will live, and the exact amount of money needed. We can only assume or hope we have enough money. What happens if we run out of it, and need a roof over our heads then?

They say “charity begins at home”, and taking care of aged parents and family members is the best form of charity. There is another important area we need to look into to help the aged by our next generation.

I am talking about the potential intergenerational financial gap between the Generation Y (born between 1980 to 2000) and Generation Z (born from Year 2000 onwards) with the Generation X (born between 1965 to 1980) and Baby Boomers (born between 1946 and 1964) due to lack of responsibility to take care of aged parents and relatives because of different life values, beliefs, perception (of individualism) or different priorities in this millennium era for the younger generations, or maybe they may not have the financial means to do so because of their lifestyle, debts and financial commitments, where they spend more than they earn.

Even now, there are signs to indicate that such situations are possible and are happening in some families. Young adults are starting their first job with credit card debts, car loan and study loan, and they may not earn enough money to pay back the loans (hopefully they don’t need their parents to subsidise their living expenses or help pay some of the loans). Some are not motivated to work because of personal issues (and parents have to support their living expenses). There are also cases where young adults don’t know what they want for their career or being choosy in job choices.

If this trend continues, coupled with increasing cost of living, parents who are approaching retirement will find it financially challenging unless they decide to cut the purse string from their financially dependent adult children. Even if the adult children can support themselves financially, they may find it hard to support their aged parents because of financial commitment for their own family (like their children and spouse) and personal retirement.

To close this intergenerational financial gap and avoid breakdown in family relationship because of money, educating children about wise money management and family unity with financial responsibilities is crucial. In a formal and structured manner, I would urge that “personal financial education intertwined with the importance of good family values and belief system” to be a subject topic in our tertiary education for Generation Z and Generation Y.

Think of it this way, if we start to educate the Generation Y and Z on this subject, and they continue to implement this value system to their children (who are our grandchildren), wouldn’t we be passing on good money values and family unity from one generation to the next. So, are we noble enough to start today?