Life has become more expensive faster than previously experienced in decades.
Everyone is affected, some more than others, especially those on limited incomes.
Count many post-secondary students in this group.
Inflation is up to eight percent this year, driving up spending on rent, books, clothes, food, drink and just about everything else.
At the same time, about half of all Canadian post-secondary students — based on data from Statistics Canada — take on $28,000 in student loans to graduate.
Those numbers are probably slightly higher today since the StatsCan datasets are almost seven years old.
Overall, it’s a lot of financial challenges for 18-24 year olds — or Gen Zs.
However, a new survey by PC Financial indicates that this new generation of young adults is more financially informed and perhaps better prepared to face these challenges than previous generations.
And it seems they have their parents to thank – who may not have been as prepared as young adults were.
“We have noticed that there is a paradigm shift when it comes to parents talking to their children about money,” said Carola Corti, senior vice president and general manager of Payments and Deposits at PC Financial.
“The survey results show that parents are talking to their children about the importance of budgeting and general financial literacy at a much younger age than they used to.”
To that end, survey results revealed that six out of 10 Gen Zs learned about basic finance before the age of 16.
That comes from their parents, presumably Generation X. Less than one in two of this demographic—aged 42 to 57—were taught money by their parents before they could legally self-drive.
The earlier focus on financial literacy appears to have produced a more confident generation of new adults, with eight in 10 Gen Zs confident in their ability to budget.
They also feel more empowered when it comes to saving: 85 percent say they are doing so or plan to do so soon.
The results are welcome good news, says board-certified financial planner Jackie Porter of Carte Wealth Management Inc. in Mississauga.
“As a parent, you should teach your children these things at an earlier age to prepare them for financial success as adults,” she says.
“The downside is that kids who feel like they haven’t gotten that advice, and who in turn don’t have those skills, are likely to feel very vulnerable financially.”
Even with knowledge, the current economic environment is very challenging, according to the survey.
Despite having the tools, 72 percent of Gen Zs still worry about their financial future.
And why shouldn’t they be when so many are in debt?
“When you have a student loan, you pay more attention to every dollar you spend because eventually you have to pay it back,” says Robin Taub, a Toronto-based chartered accountant and personal finance expert.
“Obviously, they just canceled student debt in the US, but that’s not happening here, and as interest rates go up, any debt just gets more expensive.” It’s worth noting that state and federal student loans don’t accrue interest for the time being, even after closing.
Still, more than one in three borrowed through non-government program financial institutions, which generally charge interest from the moment a dollar is borrowed, according to StatsCan data.
As the author of the book 2021 The Smartest Investment: Teach your kids to live responsibly, independently, and wisely Taub is obviously a big advocate of parents helping their children prepare to thrive in the adult world of money management.
“Parents want to start laying the groundwork early by teaching them what I call the ‘five pillars of money,'” she says. “The first pillar is to earn it, and then you have a choice of what you want to do with it.”
This is where the other pillars come into play; how to spend, save, invest and donate responsibly.
She adds that money education should always be age appropriate, with learning about investing coming once the other pillars are established.
Put simply, the earlier parents start, the more likely it is that children will do well.
Consider saving and investing: both are driven by the power of increasing returns, which is all the stronger when spread over the longest possible period.
For those who don’t know where to start, there are numerous resources online, including PC Financial, which blogs on a range of money topics, including budgeting “tips for reducing inflation,” says Corti.
The more money know; the better off young adults who move away from home for the first time, says Taub.
“In that way, living alone at university and essentially running their own household is not the first time they have so much responsibility that they have to mind their own money.”