Financial therapist says younger Canadians focusing more on emotional relationships with money
When it comes to personal finance, rule number one is to keep your emotions out of it. But new research suggests that for Gen Z investors and clients, acknowledging the emotional side of money could actually be helpful.
According to new research from Interac Corp, nearly four fifths of Gen Z Canadians agree inflation is hampering their ability to manage their finances, and three quarters say the same about the cost of daily necessities. With those external factors hanging over them, they’re more likely than older cohorts to feel stressed (42%), anxious (37%), and overwhelmed (31%) over their financial situation.
“These emotions ultimately can show up in the way we manage our money,” says Aseel El-Baba, registered financial therapist with Conscious Economics, a non-profit organization. Interac and Conscious Economics have partnered to create Mindfulness & Money, a program that aims to help Gen Z Canadians feel more financially confident and in control of their money.
“[Because of negative emotions,] we can become avoidant and choose to just put our head in the sand,” El-Baba says. “Sometimes we rebel against these emotions and turn to mindless spending or overconsumption in general to distract us from these overwhelming or stressful feelings.”
Making the mind-money connection for Gen Z
Financial avoidance isn’t just a Canadian phenomenon. A recent story by the Wall Street Journal highlighted how many young Americans are turning a blind eye towards their bank and credit-card balances, which has helped lead to a 40% increase in average credit-card debt for Gen Z consumers. That behaviour, the Journal said, can be partly attributed to the economic one-two punch from the COVID-19 economic crisis and subsequent record-high inflation.
An FP Canada report released late last year called “The Quiet Spend” found half of Canadians are concerned about their current financial situation, but most have not adjusted their unconscious spending habits. That includes putting monthly subscriptions on their credit cards, tacking on more additional items to online orders to get perks like free shipping, and buying more than they plan to during sales.
“There's definitely emotional aspects to money management,” El-Baba says. “Living costs, interest rates, unaffordable housing, and all these things we’re constantly experiencing are being reinforced in headlines we see and conversations we listen to. So naturally, it has negative impacts on our body, our health, and our overall sense of fulfillment in life.”
Young Canadians are becoming more awake to the link between feelings and finances. In the Interac survey, 37% of Gen Zs agreed financial advice that focuses on the emotional side of managing money would be more beneficial, compared to just 21% of Boomers. Compared to older Canadians, Gen Zs were also more likely to turn to older family members, siblings, cousins, and friends for support as they embark on their own wealth-building journeys.
From suffering in silence to building resilience
Traditionally, money has been a touchy topic of conversation for Canadians, but El-Baba is encouraged by Gen Z’s increased willingness to challenge that status quo.
“Gen Zs are engaging more in this conversation than any other generation that precedes them. And therefore, they're able to spark this conversation amongst their families and friends more than before,” she says. “I'm not saying it's where it needs to be yet … It’s still a taboo in many areas.”
Overall, Canadians are taking steps to take control of their finances. Interac transaction data has revealed a year-on-year increase in the number of debit transactions at grocery stores (as opposed to using credit cards), a decrease in average basket size, and more transaction growth at discount merchants compared to premium sellers.
Looking forward, El-Baba also sees an opportunity to promote financial resilience among the new, more emotionally attuned generation of Canadians. While traditional financial advice has focused on strategies to build and use wealth, she says the discipline of mindfulness – paying attention without judgment to what’s happening in your body, which allows you to take more control over it – can help address the emotional side of people’s relationship with money.
“We’re encouraging Gen Z Canadians, as well as other demographics to practice mindfulness through different tools,” she says. “Take charge of your emotions by starting to understand what they are, and how they live in your body. When you start processing your emotions, then you wouldn’t necessarily look for money as a tool to express them in a dysfunctional way.”
For financial advisors looking to support Gen Z clients, El-Baba says it’s important to make space for them to feel emotionally supported. An advisor’s ability to let young clients feel heard and seen through their challenges, she says, will determine whether they’ll come back or simply shut themselves out.
“They may feel overwhelmed by some of the lingo or concepts that feel out of reach for them,” she says. “It’s important for financial advisors to create that space … ask the right questions, focus on building a relationship with Gen Z, versus just focusing on the practical parts of the conversation.”
