Millennials, Gen X and Boomers: Is GenSqueeze Affecting Your Generation?May 25, 2015
Today’s economy is having a real impact on all generations. Lower paying jobs, higher cost of living for basics like food, utilities and rent, higher home prices and student loan debt levels are all causing those in their 20s, 30s and 40s to feel squeezed for money. It is a phenomenon that has been labeled Generation Squeeze or GenSqueeze. This squeezing is forcing 25-45 year olds to rely more on debt than ever before. The squeeze is also causing an increasing number of Millennials and Generation Xers to seek help from their parents. Not wanting to say “no” to their children and grandchildren, some Baby Boomers and Seniors are using retirement savings or available credit to lend assistance. Debt use at all generations is having a negative impact on standard of living and as a result is increasing stress levels.
Members of the under 45 generation are feeling that they are working hard for less. This feeling is caused by realities like:
- Too few job opportunities and too much student debt. Most Millennials who have a college or university education expect to obtain a well paying job based on their education. However, post-graduate work can be hard to come by. Also, their education may have come with significant cost if it was financed by student loans. Student loan repayment can take a big chunk out of a pay cheque, especially if the pay cheque is an entry level or part-time wage. Less money is available causing a lower standard of living.
- No money left to save for a house. The increasing costs associated with paying for basic necessities like rent, utilities and food uses up a substantial amount of income. The result is that there is little money left to save for a home down payment. According to a recent BMO survey, 40 per cent of first-time home buyers admitted they couldn’t afford to purchase a home without their family’s financial assistance.
- Not being able to afford to start a family. Lost income due to maternity leave, daycare costs and other child rearing expenses are all forcing Millennials to reconsider their family plans. Couples are starting families later and are having fewer children due to these cost factors.
The Baby Boomer generation is often called the ‘sandwich generation’ because many of them are dealing with aging parents while also assisting their adult children. Boomers have worked hard to fulfill their dreams of retirement and of raising children who have a better life and standard of living then they had growing up. These dreams are being challenged by situations like:
- Entering retirement with high debt levels. Higher costs of living combined with “keeping up with the Joneses” and easy credit has resulted in higher than ever levels of consumer debt in Canada.
- Borrowing to assist children and grandchildren. Using lines of credit offered by banks, or refinancing a home that is paid for are tempting ways to find money to assist children being faced with the problems discussed above. The repayment of this debt is not easy and can delay retirement, forcing parents to work for longer than originally planned.
- Lack of retirement savings and low pensions. Spending all working income on basic living expenses and debt repayment results in having no money to put aside in Registered Retirement Savings Plans or Tax Free Savings Accounts making retirement less possible.
Whether you are a Millennial, Gen Xer, Boomer or Senior, there are money and debt management resources to help. Here are some suggestions:
- Focus on controlling your spending. Set up a personal budget that recognizes fixed costs like rent, mortgage, student loan payments. Work on controlling variable costs like food, dining out, entertainment, and clothing.
- Use budget tools or money management apps to help you keep your finances on track.
- Use a debt calculator before making a major purchase to determine the affordability of the item being considered.
- Develop a post-retirement budget plan to determine how much income is required based on retirement living life style and costs compared to costs while working.
- Longer term debt options exist to help reduce the squeeze on finances and the associated stress caused by growing debt. A trustee in bankruptcy can perform a full analysis of your specific family financial situation and then review all available debt solutions. A trustee can also answer your bankruptcy questions. However, bankruptcy is not the only solution for dealing with debt. Other solutions include a consumer proposal and negotiation with creditors. Asking questions of a debt relief professional like a trustee is important, as the more you know, the more your fears of the unknown often associated with formal debt options will be alleviated.
Are you feeling the effects of GenSqueeze? Tell us about it. #GenSqueeze