The young adults living with their parents or renting because buying a house is unaffordable are starting to get restless.
In a new survey of 18- to 37-year-olds, 40 per cent of participants said their generation is mostly or much worse off compared with their parents and 54 per cent said the economic system in Canada benefits other generations over theirs. Asked whether capitalism is the best model or if we’d be better off with a “more socialist system,” 54 per cent chose socialism.
Almost two-thirds of the 2,000 participants in the Abacus Data survey said they were very or mostly optimistic about the future of Canada. Clearly, we are still a ways from reaching the point of millennials giving up on the Canadian definition of prosperity – owning a home and retiring in comfort. Yet the level of discontent among young adults is striking.
Most millennials were raised to think there would be lots of opportunities and jobs for them, Abacus chief executive David Coletto said. “Very high expectations were set,” he added. “But more and more millennials are entering the workplace and reality is starting to hit.”
Just over four in 10 survey participants were getting or had received help from parents to cover their rent and 55 per cent had parental help at some point to cover regular expenses such as groceries and insurance. Almost 30 per cent said they didn’t have any savings and 22 per cent said they had less than $5,000. Only 29 per cent said they had an employer-provided pension plan.
Given this instability, it’s no surprise that debt is common among millennials. Just 38 per cent of survey participants said they had no debt, 22 per cent said they owed $5,000 or less and 31 per cent owed $5,000 to $50,000.
Asked about home ownership, 17 per cent of the young adults in the Abacus survey figured they’ll probably never own a home and 37 per cent don’t see themselves buying for at least another five years.
We’ve been talking about millennials and their financial challenges for six or seven years and it’s now apparent that economic growth won’t solve this problem for us. Just as the economy isn’t firm enough to support higher interest rates, it’s not giving millennials a uniform sense of hope for prosperity.
One way to help millennials is to equip them with a theory of personal finance that speaks to their particular needs. On May 16, I’ll be doing a Smart Money 101 session in Toronto for young adult Globe and Mail subscribers with Shannon Lee Simmons, author of Worry-Free Money: The Guilt-free Approach to Managing Your Money and Your Life. We’ll cover topics such as how to be financially successful as a life-long renter and how people who will never be part of a company pension should save for retirement.
Beyond financial tips, what millennials need is more recognition by government and business of what they’re up against as they try to become financially independent. The alternative is to let things lie and see whether this flirtation with the idea of a more socialist system is just a whim or something more lasting.
Baby boomers should pay attention here. Millennials are becoming a dominant voting block and politicians will have to deal with that. Policies aimed at millennial voters could work against boomers by increasing taxes on high earners or cooling the housing market at a time when boomers are planning to cash in their equity.
The Abacus survey suggests that millennials still have some allegiance to the economic system that made boomers so financially successful. Mr. Coletto pointed to the fact that a majority of survey participants feel optimistic about Canada’s future and that just 15 per cent said they were mostly or very pessimistic about their personal-financial outlook.
“There isn’t a bubbling brew of anxiety,” he said. “But there are signs that millennials are stressed. As it takes longer and longer to build the nest-egg you need to buy a home or land the job you think you should have had five years ago, does this stress start building up?”
PERSONAL FINANCE COLUMNIST
The Globe and Mail, April 26, 2018