Early financial literacy key to home ownership

‘Generation Squeeze’ needs to master saving for long-term goals

Maybe you should just skip young adulthood — it could be the worst time of your financial life.

Many of Canada’s 20- to 35-yearolds are in crisis, reeling from a uniquely vicious financial assault, new studies show.

They’re staggering under debts, fighting to get a toehold in the housing market and watching their household incomes shrink.

The Human Early Learning Partnership at the University of B.C. calls young adults “Generation Squeeze,” reflecting the pressures that mount as their living standard slumps.

“There is a silent generational crisis occurring in homes across Canada,” the partnership says in a recent study. “We are talking about a massive social and economic change — one akin to a silent but no less damaging earthquake in our environment.’’

Experts in personal finance pin the blame for young adults’ plight on an unholy trinity: poor role modelling by parents, lavish spending, and the economic pressures of out-of-reach house prices, dwindling real income and daunting student loans.

Many of young people’s poor financial habits and attitudes can be traced back to their free-spending parents, observers say.

“Eighteen to 34-year-olds are getting strangled by their unrealistic expectations,” says Robert Ironside, an educator at B.C.’S Kwantlen Polytechnic University. “This generation has grown up watching parents use credit extremely liberally. The result is a culture of debt in which people feel entitled to spend.”

Others say it’s the fault of young people’s live-for-today philosophy. David Chilton, author of The

Wealthy Barber Returns, has two children in university. He says it’s understandable that many young people finish college with debts; they often do themselves no favours with their spending.

“When you sit down and look at their math, a lot of them got them- selves into some of this difficulty,” says Chilton. “A lot of their lifestyle decisions are absolutely crazy.”

Far too many young adults know too little to handle daily money matters — let alone the longer-term planning they should be doing, Ironside says.

“We’re putting our entire future at risk because of this lack of financial literacy,” he says.

Josie Hung, 22, works diligently to manage the financial side of her life. From her $13-an-hour job as a pastry chef, Hung makes mortgage payments, handles household expenses, sets aside money for property taxes and saves for travel.

She and her mom pooled $200,000 to buy a condo two years ago and have a $30,000 mortgage.

Hung describes herself as the financially responsible member of this mother-daughter duo.

She lives frugally, taking public transit and avoiding expensive clothes.

She never leaves an unpaid bal- ance on her credit card. “I’m a careful spender,” she says. “I’m always aware of how much money I have and where it’s going.”

She criticizes parents who finance their adult children’s spending, warning that these misguided subsidies prevent young people from learning financial management skills, keeping them in a state of perpetual childhood. “It’s mind-boggling,” she says of parent-dependent youth. “They have very expensive lifestyles, but don’t have the money to afford them. They will get hit very hard.”

Hung, who long knew that cooking was her passion, fast-tracked into a 10-month pastry program at Vancouver Community College during her final year of high school. That let her come out of Grade 12 with a college diploma in hand. The school board paid most of the program’s costs. Hung, who was able to draw on savings from a high-school job, graduated without debt.

She was fortunate.

Two years after graduation, the average Canadian student debt is $20,000, according to the Canadian Federation of Students. Twenty-five per cent of post-secondary students will have trouble repaying their loans, Credit Counselling Society CEO Scott Hannah says.

“People are not looking at how to minimize their student loans. They’re thinking ‘How much can I get?’ — when they should be doing the exact opposite,” Hannah says.

If careful spenders like Hung are potential role models for young adults, a young and high-income Calgary realtor that Ironside met a few years ago is the dark side of the spending force.

“He told me, ‘My generation is never going to start saving money. We’re happy the way we are now. We’re going to make a lot of money, we’re going to spend a lot of money. We’re going to use money to the fullest extent we can,’ ” Ironside recalls. Ironside’s reaction? “That’s OK when things are going well, but the second conditions change and you’re not making that kind of money, problems surface.”