Young adults have a much higher level of financial stress than average. A dire need for financial literacy, what all that?
In April, there was talk of the rapid deterioration of affordability and the difficulty in accessing home ownership felt more strongly by younger people. And it hasn’t gotten better since. If only based on an average mortgage rate of 6.33%, many loan applicants would have to stress test at 8.3% or higher. The 2023 version of its Retirement Readiness Barometer from human resources firm Mercer focused on millennials. If they are renters throughout their careers, millennial workers must save 50% more than owners if they want to have sufficient income in retirement. In other words, a millennial who rents throughout his career should save eight times his salary in order to be ready for retirement, and retire at age 68. This same millennial, if he owned his home, would only need to save 5.25 times his salary, and could retire three years earlier, at age 65, it was said.
However, there is hope. In June, it was mentioned that in the wake of the generation preceding it, generation Z will be able to count on a favorable balance of power on the job market which could change the situation. For the future, even not so distant, the anxiety of these young adults should be transformed into a certain confidence.
But, in the meantime, we will have to cross the zone of turbulence of a recession probably in progress which, it is to be hoped, will make it possible to return to the balance between supply and demand in all these sectors currently in crisis or under high voltage.
So, on a daily basis, Canadians remain concerned about bills to pay and debt. An Equifax Canada survey conducted ahead of this Financial Literacy Month highlights a high level of financial stress, which is more intense among young people:
36% of young adults reported missing a bill payment this year, compared to 23% of all respondents;
52% of respondents aged 18-34 experience anxiety about their personal debt, which is significantly higher than the overall average of 39% of other respondents;
45% of respondents are worried about repaying their debts (mortgage loans, student loans).
Housing affordability remains the biggest concern, with nearly a third of respondents needing additional income to cover increases in their mortgage or rent payments. Many of them also foresee moving in response to the inaccessibility of housing. Young adults are also more likely to explore “odd jobs” or consider taking a second or even third job to meet their financial obligations. As for expectations regarding retirement, we don’t even think about it.
In the fall edition of his Survey on the financial well-being of Canadians, the Royal Bank is adding more. Money stress not only causes Generations X, Y, and Z* to lose sleep, but it also has a negative effect on their mental health and personal relationships. Thus, “59% of Generation Y respondents, 53% of Generation Z and 47% of Generation X report experiencing “significant stress” in their personal relationships related to their finances, compared to a national average of 43%. And a large majority of all three generations agree that they would be happier if they had more confidence in their financial future (88% of Gen Z, 86% of Millennials, 80% of Gen X). »
To illustrate the overall picture, data from an annual survey of workers by the National Payroll Institute tells us that “the number of employees considered to belong to the cluster of financially stressed workers has increased by 20 percentage points in the last year alone, and now represents 37% of the country’s workforce. » To keep their heads above water, 63% spend their entire net salary and 30% more than their paycheck, which forces them to go into debt or dip into their savings with each salary cycle. And we say we are surprised to observe that 35% of these financially stressed employees receive more than $100,000 per year.
Room for literacy
Which can only highlight the importance of financial literacy. Especially since almost half of the respondents to the Equifax survey say they have never had any financial education. Furthermore, young adults aged 18 to 34 are more likely to use social media for financial education, at 42%, compared to 22% of all respondents.
Especially, also, that only 15% of respondents to a survey by the site specializing in personal finance WealthRocket consider that these social media can be trusted. But among younger people, the 18 to 34 age group is most likely to seek financial advice and follow it. In particular, 18-24 year olds trust social media the most, with 9% even finding it “extremely trustworthy”.
* According to Statistics Canada’s classification, generation