What are the key factors that make it harder for Gen Z and millennials?
Younger generations are learning the need of financial discipline the hard way with two --or perhaps three -- recessions under their belts and a time of high inflation.
Nearly 50% of Canadians claim that their financial situation has worsened since a year ago as a result of the recession, inflation, and overheated property markets. Young folks more susceptible to being affected? Is it truly difficult for them? Although the baby boomers are often said to have had it easier, they were also subject to extremely high interest rates, which remained over 10% until the early 1990s.
The economic situation has been particularly advantageous for boomers and late career employees, with their net worth soaring by 350% over 20 years. However, people 44 and younger have had the smallest increases in their net worth.
Wealth accumulation is now more difficult than ever before. Since 1985, tuition has increased three times more quickly than the rate of inflation, virtually tripling the typical student loan balance in that period. Given that the down payment for a home has increased in relation to family income since 1980, home ownership has grown more challenging. From then, the average age of first-time homebuyers has climbed by four years because of the need to save more money.
Less and less firms, particularly in the private sector, are offering pension plans, and when they do, they are frequently less generous. Disbursements will also rise as fewer employees continue to pay into these programs, which is another factor.
For young people, things aren't all bad, though. Long-term, families in Canada have been able to outrun inflation, though this has been less of a problem lately because to women's growing share of household income. Because of the advantageous labour market that has been created by the labour shortage brought on by an aging population, the effects of any economic crisis on the unemployment rate and employment should be minimal.
The average tenure of work is shorter today than it was in the 1990s, which may be due to young people changing occupations depending on compensation. CPA Canada's Thriving or Surviving survey finds that this race against the clock is producing more stress for younger individuals, who are critical of their financial literacy and underline the significance of starting to save early. This is a result of the necessity to pay off college debt, increase savings, and make retirement plans.
In contrast to how they are frequently portrayed, Generation Z and millennials are learning the value of financial discipline the hard way after experiencing two (or even three) recessions and a period of high inflation.
Since 25% of people between the ages of 18 and 34 have either given or received an inheritance, many baby boomers are aware of this and are eager to lend a helping hand. Due to the fact that their age group transmitted money to family members three times more frequently than other generations during the epidemic, those between the ages of 18 and 34 also appear to recognize the significance of intergenerational wealth transfer. And for legitimate reasons, for example, to help cover a relative’s financial hardship.
The principles of financial literacy are still crucial and more important than ever despite technological advances in personal finance (apps becoming more and more popular, digitalization of currency, the advent of new assets like cryptocurrencies, robo-advisers, etc.). They are essential for empowering young people, particularly those who lack inheritances and must rely completely on their own knowledge, abilities, and good fortune to improve their financial circumstances.
