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A Conversation About Gen Y Money

The plight of Gen Y is a hot topic around the personal finance blogosphere these days, and for good reason. Millennials continue to face strong headwinds from an economy that has been stuck in neutral since the global financial crisis of 2008.

Meanwhile, the cost of higher education is soaring and new graduates are entering a workforce where employers are more likely to hire temporary or part-time workers, rather than provide full-time jobs with benefits. Record-high real estate prices could also mean that we’re raising a generation of renters (not that there’s anything wrong with that) and boomerang children.

But despite having it tougher than previous generations, there are opportunities for Millennials – who this year overtook Baby Boomers as the largest demographic – to forge ahead and carve their own path in the new economy.

Related: The worst advice ever given to Millennials

The LSM Insurance team reached out and asked me some questions about Gen Y money and how Millennials are handling their finances. Here are the questions, along with my answers.

Gen Y Money

Among your readership, what percentage would you estimate are Millennials (born between the early 1980s to the early 2000s)?

I was a bit surprised to see that just 30 percent of our readers are in the 18-34 demographic. Nearly the same percentage of our readers is age 55+.

Would you say Millennials are under-educated with regards to their personal finances?

It’s not just Millennials who are undereducated when it comes to money. The vast majority of Canadians don’t understand the basics of personal finance. It’s hard to teach your kids how to be smart with money when you don’t have a good handle on it yourself.

What are some reasons why Millennials should start managing their personal finances?

Millennials should start managing their personal finances because there’s never been a better time to take control of their financial situation. Information is plentiful. Smart-phone apps, like Mint.com, and budgeting tools like YNAB, can help, as can reading blogs and participating in forums like Reddit, the Canadian Money Forum, or Red Flag Deals with other like-minded individuals.

The advent of fee-only financial planners and online investment services (aka robo-advisors) means that Millennials can work with someone who puts their best interests ahead of his or her own.

Related: How this unconventional pair can save you money on your investments

When it comes to investments, Gen Y might be more inclined to use a robo-advisor like Wealthsimple to manage their portfolio. An robo-advisor takes a rules-based approach to managing and rebalancing your portfolio based on unique individual needs, rather than chasing a gut feeling, last year’s winning fund, or the investment product that pays your advisor the highest commission.

What can financial institutions do to engage and serve more Millennials or, at the very least, encourage them to start thinking about financial planning?

Financial institutions need to do more with technology to get Millennials engaged with their bank and their finances. Start by making it easier to do business online or with a smart phone. Online lending applications are brutal and often still require customers to visit a branch to sign documents or meet with a representative. 

Robo-advice is a huge technological breakthrough and if there is a way to automate the more difficult aspects of your finances then Millennials might be more apt to talk to an advisor about goals and planning.

Also, be more open and transparent. The Internet has made it easier to shop the competition. Yet, for example, banks still send out mortgage renewal notices at the posted rate, rather than offering their best and lowest rate first. That type of behaviour won’t earn the trust of consumers.

What are some things younger people should be concerned about, that their parents never really had to worry about?

I think the general consensus is that this generation will face high student debt, high housing prices, and stagnant wage growth in the traditional economy, lower investment returns, and higher taxes over the long term.

RelatedWhy multiple income streams is a better emergency fund for Millennials

But there’s a new frontier in which Gen Y can thrive, and that is driven by technology and the knowledge economy. So many new jobs exist today that our parents would have never envisioned 10 or 20 years ago – like a social media manager or digital content manager. A savvy Millennial can get ahead if he or she focuses on the new economy rather than trying to fit into the old one.

Finally, one last thing that has always bugged me about generation issues is the people who believe the Canada Pension Plan will be raided by a future government to pay for deficits. That’s highly unlikely to happen and in fact our CPP is actuarially sound for at least 75 years, according to the latest research. It’s not going anywhere.

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6 Comments

  1. canadianbudgetbinder on October 9, 2015 at 4:41 am

    It really is hard to educate your children when you don’t understand personal finance yourself. On the other hand there are people who understand what they need to do but they don’t follow it for a myriad of reasons.
    I agree that it’s more of a widespread concern not just with Millennials. I also agree that with Millennials it’s all about technology. If you can simplify the process of finance than the likelihood of engagement is higher. It boils down to ease of use and convenience.

    • Echo on October 9, 2015 at 9:11 am

      This generation is more empowered than ever due to the access of information available online. Gone are the days when bankers, stock brokers, car salesmen held all of the information and consumers had no choice but to accept what was being offered as fair and reasonable. Information is power, we just have to take it upon ourselves to use it and level the playing field.

  2. Kurt on October 9, 2015 at 6:13 am

    “Make it easy for me” seems to be the rallying cry of the millennials. As irritating as that is, banks seriously need to step it up. They are catching up but very slowly. I’ve made it my personal mission to try not to deal with any company that still uses or suggests I use a fax machine… I actually managed to complete my last real estate purchase almost entirely from my phone. It wasn’t easy… Which means the banks still have a long way to go…

    • Todd Roberts on October 9, 2015 at 6:32 am

      Most mortgage brokers I know execute documents exclusively via email. Try them instead of the banks for a more “up to date” experience.

    • Echo on October 9, 2015 at 9:08 am

      I agree, the banks need to step-up in a big way here. You should not have to visit a branch to sign a loan application, especially as an existing customer. But the banks value face-time so they can try and sell you other products and insurance add-ons.

  3. Rob on October 9, 2015 at 10:23 am

    I think there’s a possibility that the concern you have in hearing from some about the viability of CPP stems from people (not just millennials) not understanding that there’s more to their pensions that what they think – for example, alot of people combine the OAS and CPP together and think of them as CPP.

    There are changes coming – for example, the move to 67 for receiving full benefit. Those changes can also reduce confidence in the viability.

    You are correct – CPP will be there, as will OAS – but they will not be the same.

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