This is the best advice you can give to your kids

That’s a large cohort of future Australian investors, many of whom in the not-too-distant future will be earning wages and superannuation on their long journey towards retirement.

Parents with Gen Alpha children – and even children at the younger end of the previous Gen Z generation, born between 1997 and 2012 – should be taking a leaf out of the World Savings Day book to teach them about money and investing.

This can include teaching them how to save and set financial goals, how to budget, and about the power of long-term compounding returns – all skills and knowledge that will serve them well as they grow into adulthood.

Giving children some starting investment money can be highly beneficial as parents can use this as an opportunity to have meaningful conversations about money management, investments and financial planning. That is, by imparting financial knowledge parents can empower their children to make informed decisions about their personal finances as they grow.

Australia’s population is set to increase by more than 50 per cent over the next 40 years, according the recently released Intergenerational Report 2023.

By the 2062-63 financial year, based on the Treasury’s estimates in the report, average life expectancies will be higher than now. Life expectancies at birth are expected to rise from 81.3 years for men and 85.2 years for women now to 87 for men and 89.5 for women.

By 2062-63, a quarter of the total Australian population will be 65 and over.

The people who Treasury is mostly talking about here are those in the Millennials generation, born between 1981 and 1996. The youngest of this cohort will have turned or be turning 27 this year; the oldest are 41 or 42.

Fast-forward to 2062-63 and the ages of Millennials will be spread between 67 and 82 – the people included in the age brackets at the upper end of the Intergenerational Report’s long-range population projections.

The eldest in the younger Gen Z generation will also be approaching or already in retirement by 2062-63.

So, why is all this relevant? In simple terms, the people referred to as “the younger generation” not that long ago are progressively getting older and moving ever closer to retirement age.

When they do reach retirement age, they’re likely to be living longer than those in previous generations and will probably need to rely on their accumulated savings for longer.

Therein lies a challenge. This year’s ASX Investor Study found that young Australian investors are likely to be more risk-averse than their older counterparts and less likely to tolerate moderate or high variability in their investment returns.

Many have low levels of investment diversification, which may also be counter-effective against their relatively high level of risk aversion.

As a consequence, their retirement balances may not be sufficient to sustain them through their extended retirement years.

It all starts with education. Setting up the next generations of investors is a process that should begin from a young age, with parents teaching their children the basics about money and finance and potentially investing on their behalf.

That can later be extended to them getting professional advice, which will become increasingly crucial for current and future generations of Australians over time.