Young couples and empty nesters among the biggest losers in 'financial comfort'

Nearly half (45%) of Australians with home loans reported spending more than 30% of their disposable income on mortgages during the last six months, according to ME bank’s 14th annual Household Financial Comfort Report. The data indicates that housing stress is still common among households.

However, data also revealed that financial stress for renters has somehow lessened in the past six months as a result of the cooling housing market and falling rents.

“While almost three-quarters (72%) of renters were previously contributing over 30% of their disposable income towards rent, this number dropped significantly to two-thirds (67%) in the most recent survey,” said ME consulting economist Jeff Oughton said in a statement.

Oughton listed the biggest winners and losers in financial comfort over a six month period:

Winners:

1. Self-employed workers: The self-employed sector, comprising of tradies and professional freelancers, is reported to having the highest level of comfort and largest increase of manpower (up 17% to 6.22 out of 10 during the first half of 2018).

The rise is linked to all components that make up the Household Financial Comfort Index, particularly  ‘changes in household financial situation over the past year’, ‘comfort with cash savings’ and ‘confidence in the handling a financial emergency’.

2. South Australia: The state has seen the highest increase of financial comfort among any other territory (up 16% to 5.78). The reason can be attributed to a rise across all components that make up the Household Financial Comfort Index, particularly increased ‘confidence in the handling of a financial emergency’, ‘comfort with long-term investments including superannuation’, and ‘comfort with income’.

Losers:

1. Young singles and couples under 30 with no kids: Comfort for this segment dropped by 11% to a record-low 5.3 out of 10. The drop can be connected to all components that make up the Household Financial Comfort Index, mainly low scores in “comfort with savings” and “confidence in the handling a financial emergency”.
2. Empty nesters (50 years old and above): Financial comfort for this segment is down by 3% to 5.22, 7% below the average of 5.6 since the survey commenced. Changes to superannuation in the past year appear to significantly impact this life stage, according to Oughton.
3. Students: Due to lack of savings, investment, and net wealth, the segment is always among those with the lowest financial comfort, Oughton said. Their financial comfort is down by 15% to 4.18 since the last report.