For decades, Australians have associated wealth with home ownership. As our country has become more diverse and inclusive, and individual Australians achieve greater freedoms, these ideas are changing.
A recent study1 by AMP highlights how our definition of ‘wealthy’ is shifting – and how your bank, super fund and adviser can help you achieve wealth, no matter what that means to you.
Home ownership and financial security
Historically, home ownership in Australia was seen as a pathway to financial security and stability. Prior to WWI, almost half of the country’s housing stock was owned either outright or through a mortgage. This figure grew through the ‘40s and ‘50s, driven in large part by people’s memories of the financial turmoil endured through the wars and the Great Depression.
By 1966, home ownership had reached a peak of 73%. In the years that followed, however, Australia saw significant social and demographic change which altered our relationship with home ownership. These included:
-
Longer life expectancy
-
Fewer people in their 20s marrying or starting
families
-
Parents choosing to have fewer children
-
Greater average individual wealth thanks to globalisation
-
Greater migration
-
Larger workforce participation
By 1986 – just 20 years after the ’66 peak – home ownership had fallen to 67%.
Retirement, home ownership, and ‘FORO’
Until the 1970s, few Australians gave much thought to retirement planning. Life expectancy was lower and most people typically only needed to make their money last for five years after leaving the workforce. As a result, the stability afforded by home ownership was often enough to act as a substitute for a real retirement plan.
Increasing life expectancy – now more than 80 years – means this is no longer a viable option. Today’s retirees can expect to live another 25 years after retiring. In response, the Australian Government introduced compulsory superannuation payments in 1992 to assure working Australians of a level of dignity and independence in retirement.
Source: ABS, The Demographics Group
Changing Australian life stages, 1950 – 2023
While at first Australians assumed this would be enough, more recently a ‘fear of running out’ (FORO) has begun to emerge, with women and single parents especially worried.
Common causes of FORO include:
-
Longer life expectancy
-
Rising living costs eroding the value of savings
-
Super losses incurred by taking out savings during the COVID pandemic
The new ‘wealthy’ – and how advisers are helping
With Australians living longer, waiting to start families and increasingly concerned about running out of money in retirement, it’s understandable that our ideas around wealth have shifted.
Fifty years ago, asking someone what it meant to be wealthy would likely be met with the same response each time: owning their own home.
In the 2020s, our diverse lifestyles have led to an equally diverse understanding of what it means to be wealthy. The concept of wealth has shifted away from an exclusive focus on retirement savings to reflect a holistic sense of security, wellbeing and happiness for our entire lives.
It includes:
-
Financial independence
-
Having contentment
-
Being in good health
-
Being close to family
-
Having the freedom to make choices
-
Having time to do things for ourselves and others
-
The absence of stress
-
Being educated and being able to educate our children
-
Having the ability to help and care for others
-
Having a supportive social circle
-
Having a sense of success in life
Watch Demographer Bernard Salt showcase the ‘What wealthy means for Australians in 2023’ research
For some, ‘wealthy’ may still include home ownership, but it doesn’t have to. Instead, being wealthy could mean going on regular holidays, buying a rare collectible or having the financial security to chase personal dreams.
1 – What Wealthy means for Australians in 2023, an exploration of cultural preferences and change, AMP, The Demographics Group
Source: AMP August 2023
Important:
This information is provided by AMP Life Limited. It is general information only and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances and the relevant Product Disclosure Statement or Terms and Conditions, available by calling 02 9299 1500, before deciding what’s right for you.
All information in this article is subject to change without notice. Although the information is from sources considered reliable, AMP and our company do not guarantee that it is accurate or complete. You should not rely upon it and should seek professional advice before making any financial decision. Except where liability under any statute cannot be excluded, AMP and our company do not accept any liability for any resulting loss or damage of the reader or any other person. Any links have been provided for information purposes only and will take you to external websites. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.
