Canadians across various demographics are experiencing growing financial challenges that show little sign of improvement. Although the effects of inflation and international events are felt universally, the consequences and future prospects differ among age groups.
The socio-economic context
Numerous factors, such as the COVID-19 pandemic, the Russo-Ukrainian War, and the growing wealth gap, are contributing to the everyday financial strains people are facing. Currently, the typical Canadian is dealing with rising interest rates, inflation, and increasing grocery prices. TransUnion reported that by the first quarter of 2023, total consumer debt in Canada reached an unprecedented high.
Baby Boomers (born between 1946 and 1965)
While it might seem that baby boomers are in a favorable position, as their net worth surpasses that of earlier generations, they suffer from the financial aftermath of the “Great Recession” (2007-2009), which significantly impacted their income and home values.
Currently, many are facing debts and healthcare expenses as they enter retirement. According to a survey by Sun Life, 20 percent of retirees in Canada are still servicing mortgages, with over half carrying unpaid credit card balances.
However, it’s not too late to create a financial plan. Financial experts suggest that individuals should familiarize themselves with their pension plans, Canada Pension Plan (CPP), Old Age Security (OAS), Registered Retirement Savings Plans (RRSPs), and Registered Retirement Income Funds (RRIFs) to regain control over their finances.
Generation X (born between 1966 and 1980)
Generation X, often balancing responsibilities for both aging parents and children, faces a significant financial burden. Their major concerns include preparing for retirement, managing monthly expenses, and ensuring job stability. A 2023 American survey revealed that only 12 percent of respondents expected to rely on an inheritance for retirement income, and 46 percent doubted their ability to live comfortably in retirement with their existing savings.
To approach retirement planning, envisioning this phase of life can inspire better savings habits. Setting a clear savings goal and considering an automated savings plan can enhance contributions to workplace retirement savings programs.
Millennials (born between 1981 and 1996)
Unlike baby boomers, millennials are facing significantly higher costs for higher education and home ownership. This financial reality restricts their ability to save for retirement or even meet everyday expenses.
A notable advantage for many millennials (and Gen Z) is the cost reduction achieved through remote or hybrid work arrangements. A survey found that over a third of millennials reported increasing their savings due to decreased expenses related to commuting, professional attire, and dry cleaning.
Financial advisors recommend focusing on debt reduction while concurrently pursuing other financial goals, as well as creating a regular monthly budget.
Generation Z (born between 1997 and 2012)
Young adults in Generation Z are facing unprecedented challenges, with a Deloitte study from May 2023 indicating that they experience higher levels of financial stress, anxiety, and overwhelm in comparison to older generations. Living paycheck to paycheck is common for many in this demographic, leading to concerns about meeting their financial obligations.
A 2023 study revealed that 37 percent of Gen Z respondents, compared with 21 percent of baby boomers, felt that financial guidance would benefit from addressing the emotional dimensions of money management.
Conscious Economics, a nonprofit organization based in Canada that focuses on financial education and literacy, suggests that Gen Zs seek an “emotional support human” within their network to assist in navigating the financial paths they wish to pursue.
Improving our financial relationship
Regardless of age, enhancing our connection with money involves a similar approach, according to Aseel El-Baba, CEO of Holistic Optimal Wealth. Based on her experiences as a financial therapist, she notes that the key differences among generations in handling financial anxiety relate to their emotional literacy levels.
To foster better financial emotional health, individuals must first acknowledge their emotional ties to money. For instance, recognizing feelings that arise during attempts to manage credit card debt can be an important step.
El-Baba also emphasizes the importance of developing a trusting relationship with money as if it were a new companion.
Scheduling a “money date” can be one method to cultivate this bond, she says. This would involve creating an ambiance—perhaps enjoying your favorite drink, lighting candles, and finding a comfortable spot to engage in financial discussions.
“This way, you start associating positive experiences with money, making it something to look forward to,” she adds.
A focused look at seniors
Retirement may not live up to expectations: in Canada, many seniors find themselves in precarious financial situations.
For instance, a 2019 report from Statistics Canada analyzed changes in the financial health of “senior Canadian families” (where the main income earner was at least 65 years old) from 1999 to 2016.
By 2016, 42 percent of these senior families were in debt, a rise from 27 percent in 1999. Concurrently, consumer debt levels grew from 24 percent to 37 percent. These troubling trends may stem from easier credit availability, soaring property prices, and a culture of consumerism.
A 2023 survey indicated that eight out of ten Gen Z participants felt that external factors, such as inflation (78 percent) and rising costs of essential goods (75 percent), significantly impacted their financial management capabilities.
This article was originally featured in the January 2024 edition of Thewindowsclubs magazine.
