Young still must plan for future

Dear Money Lady,

You wrote a column a while ago about encouraging our adult kids to make it on their own financially. It seems to me that this new generation really can't afford to do that, and I think they should stay at home as long as they can.

Susan

There are indeed a lot of parents who agree with you. However, at some point, your adult children have to eventually find their own way without continued financial support from their parents.

It may be a little harder for the X and Y generations who still want to do what others have done — buy a home, pay off school debt and eventually save for retirement. Generation X are those born from 1965 to 1980 (aged 41 to 56), and Generation Y (or millennials) are those born from 1981 to 1995 (aged 26 to 40).

Basic needs for these spenders are much higher and have outpaced average inflation. The cost of purchasing a home in Canada has risen from about three times disposable income in the 1990s to seven times household income. House prices have skyrocketed more than anyone could have imagined due to COVID. The increase in the cost of living compared to past generations has dramatically challenged the ability of Generations X and Y to achieve their goals. They definitely need to be more creative dealing with this new reality.

Let's look at the differences in the generations. Baby boomers tended to be extremely loyal and more of a team player when it came to their work environments. They were less adaptable to change and, most would agree, are not as tech-savvy as the newer generations.

Generation X are said to be very self-confident and quite demanding when wanting to have their opinions heard, while Generation Y are even more independent, confident and tend to be more obsessed with social media.

They have something in common: they both have felt the impacts of a two-working parent family, the rise in divorce rates and much less stability with employment opportunities.

Due to a higher cost of living and a low-rate environment that has fuelled the propensity to reach for credit, these two groups, especially Generation X, find themselves in more debt than ever. As a whole, they have less access to company pensions even though they want to retire at an earlier age, have ongoing education expenses for themselves and their children, have increased costs for basics like food and housing, and may have the burden of anticipated care for their parents. This, of course, changes the way they view the world and how they plan to make their way forward.

Expanded digital technology provides knowledge, transparency and clarity for these generations who are more confident, optimistic and smarter than any before. They will need to get into the habit of budgeting more, saving more and, most of all, planning for their future. That being said, they are not afraid to get uncomfortable and try new things, which is an amazing advantage over past generations who would shy away from getting out of their comfort zone.

Saving for the future with regular monthly contributions is of the utmost importance for these generations: utilizing TFSAS, RRSPS, company pension/savings plans, personal savings accounts and participating life insurance. Planning, learning and talking to others who have been successful is the key to balancing current financial needs and meeting long-term goals.

Yes, it will be a little harder for these people to retire debt-free and wealthy. They may have to work longer or be more creative when developing a wealth-building strategy, but they will get there. It is said that when times are harder, more challenging and problematic, we become better, more resilient and actually discard our selfdoubt to aspire to greatness. I am excited to see what these generations do.

Remember, winners will always find a way to triumph over adversity no matter the odds. These generations are more educated, more confident, more optimistic and they can achieve more.

The fact is, if you believe that you were born to just grow up and pay bills, well, that's all you'll do. But, if you believe that you can do more and become better than you are, then get started, be focused and stick to your plan. You'll get there, I promise.

Good luck and best wishes.

Visit Saltwire.com to hear Christine Ibbotson’s podcast, which is released each Friday. Christine Ibbotson is author of How to Retire Debt Free & Wealthy and Don’t Panic – How to Manage your Finances and Financial Anxieties During and After the Coronavirus. If you have a money question, visit askthemoneylady.ca.