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A Financial Divide: Baby Boomers vs. Millennials

April 20, 2017

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It is no surprise that times have changed since the days of the baby boomers. While the majority of us encounter these changes in our everyday life, whether it be the technology we use or the cars we drive, many millennials would argue that these shifts are not necessarily for the best.

There is no doubt that baby boomers and millennials have different ideas when it comes to lifestyle choices; what was once possible 40 years ago is much less achievable for today’s millennials. With all these changes, the question becomes: what’s causing millennials to move at a much slower pace than those of the baby boomer generation?

In today’s Western society, an increasing number of young adults are waiting until well into their 30s to get married, buy a home and have children, while their baby boomer parents may recall that around that same age they were already married, owned a house and had started having children.

Although millennials are entering the workforce at around the same age as their parents had, statistics show that they are earning $4,200 less a year than their parents were in the late 1970s. This disparity in income, combined with a rising cost of living, is resulting in millennials owning less and owing more, while placing the two generations at opposite ends of the financial spectrum.

In addition to the exponential increase in the cost of living, the 2008 recession led to nearly 30% of baby boomers helping their children pay their rent and/or mortgages. With the increase in the cost of living, many millennials are finding it hard to support themselves. According to Statistics Canada, the percentage of young adults from ages 20 to 29 living in the parental home is hovering around 42%. This can be attributed to the fact that they never left at all or because they moved back home after living elsewhere.

In 1977, the average cost of a detached home in Vancouver was sitting around $69,000. Today, that same home is now valued at $1.8 million. According to the Real Estate Board of Greater Vancouver, detached homes have gone up in average value by 159% in the last decade.

In 2016, the first millennials turned 35 and entered what is known as the “peak spending age.” On top of normal every day expenditures (mortgage, groceries, transportation, insurance, etc.), millennials now have more expenses to think about than their baby boomer parents did. With the technology era upon us, the cost of things like internet, smart phones and data packages add up quickly.

The Canadian Radio-television and Telecommunications Commission (CRTC) recently released a report showing that Canadian households spend an average of $203 a month on cable and internet packages. Canadians are opting for faster and larger internet packages, as well as spending more money on their wireless devices, which all factors in to the added cost of living for today’s millennials.

In addition to technology-related expenses, the cost associated with post-secondary education has dramatically increased over the years. A recent survey from the Bank of Montreal showed the majority of students graduating from a post-secondary institution carry around $20,000 in debt, and more than a fifth of those surveyed anticipate graduating with more than $40,000 in debt. As a result, millennials are graduating with substantially higher student debt and an increasingly competitive employment market.

Between the extreme student loan debts and the income gap, it’s no wonder that there is a financial and lifestyle divide between these two generations. With an overwhelming amount of debt looming over millennials’ heads and entering a workforce that’s paying less money, the ability to earn and save more has become nearly impossible.

These factors, combined with an ever-expanding consumer market, has led the way for many millennials to spend more than they have, often resulting in disastrous financial troubles. While some are able to sort out their money troubles on their own, many seek the help of a Licensed Insolvency Trustee.

A Licensed Insolvency Trustee is regulated by the Canadian government to process personal and corporate bankruptcies, as well as administer proposals to creditors. They are officers of the court whose primary role is to ensure that your rights and your creditors’ rights are maintained throughout the process. Trustees abide by a strict code of conduct and no matter your financial situation, will help explain all of your debt relief options.

The next time you, or someone you know, is struggling with debt, take a minute to think about who you want to help solve the problem. At Smythe Insolvency, we give free advice to people struggling with debt. We understand the overwhelming stress financial difficulties can cause and the impact it has on families and relationships.

Call us to arrange a free consultation. Together, we can find a solution.

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