Generation Y encompasses children born in the 1980’s and 1990’s. This generation is unique and commonly associated with certain characteristics that stem from the time and the environment in which they were raised. These millennials are often called entitled, dependant on their parents and self-absorbed. They were raised to place importance on their own self development and education and have brought this into their personal and professional lives.
As the economy changes Gen Y’s could be worse off than their parents financially. Challenges facing Gen Y include;
Finding traditional full time employment: This can be especially tough with increasing contract work and part time jobs, both of which provide less certainty and benefits than full-time employment.
Stagnant annual salaries: In 2011 a recent graduate in Ontario earned $42,636 compared to 2006 where they earned $41,699[i], this is striking when you consider inflation and the increased costs of education and living.[ii]
Pensions:Commonplace retirement programs for Baby Boomers are becoming scarce or non-existent for Gen Y as fewer employers in Canada are providing pension plans.The ever increasing cost of living: According to the BMO Wealth Institute the cost of buying a home in Canada is about 8 times the average individual with a full-time job’s pre-tax income compared to 5 times in 1997.[iii] [iv]
FOMO: The tech savvy Gen Y’s often suffer from “fear of missing out” this is amplified by their access and addiction to social media. The plugged in generation is relentlessly aware of what their friends are doing, which can in turn impact finances. How? They want to do all the fun things that their friends are posting on Instagram and Facebook.
Gen Y is also known for their optimism and confidence, both attributes will help this generation to bring out all of their financial muscle, and prepare for their future. While the challenges outlined above are real, Gen Y has access to technologies and savings vehicles to help them reach their goals.
Gen Y can contribute to their RRSP’s annually, which allows them a tax deduction in the current year and tax deferred growth. They also have the opportunity to put their savings, (up to $10,000 annually) into a Tax Free Savings Account, which is not taxed. While saving is tricky, especially for the social media savvy generation, simple things such as bringing your lunch to work and instead contributing as little as 50 dollars a week for 10 years to your TFSA could result in savings of $35,597.84.[v] As well, Gen Y has access to infinite budgeting and cash management tools available at the touch of their phone. These tools should be used to get ahead and assess their current spending to determine how they can cut expenses and get on track to achieving their goals.
With the expected challenges outlined above Gen Y should start the financial planning process early. They should take a close look at their finances, goals and the steps they are taking to achieve them. With the right planning, time and innovation on their side, Gen Y can combat the hurdles of their generation.
[i] Council of Ontario Universities, 2013 Graduate Survey, September 2014
[ii] Rob Carrick, Globe and Mail, “Gen Y’s Financial woes are now everyone’s problem” September 8, 2014
[iii] BMO Wealth Institute “Wealth Generation: the Financial Challenges for Generations X & Y” January 2014,
[iv] Rob Carrick, Globe and Mail “Why Canadian Homes are more unaffordable than ever” November 25, 2013
[v] 50 dollars a week for 10 years with a 6% real rate of return
