Traditional life cycle of the adult Canadian: Graduate from college or university, rent a place, buy a car, get married, buy a house, have kids, buy a bigger house, coast into retirement.
Generation Y, don't get your hopes up. Your parents' life may look like this, but yours will probably be different. You'll spend more time and money to acquire an education, and you'll likely take longer to get your career going and achieve financial independence. There will also be more compromises along the way.
This September, at the University of Western Ontario, I'm doing some personal finance sessions on college and university campuses along with Globe and Mail online personal finance editor Roma Luciw. As a kind of introduction, I've come up with some ways that Gen Y's financial path will differ from that of its parents.
The first point is that many young adults today will be in university and/or college for longer than their parents. When I went to university, there was such a thing as a three-year Bachelor of Arts degree – you did a fourth year to receive an "honours" BA. Today, undergrad degrees are commonly four years in length. But even that four-year degree may not suffice.
It's common today for students to graduate with a four-year degree and then find they need to add a college diploma or certificate as well to have an edge in the job market. That means an extra year or two of school and, of course, more tuition fees to be paid. Student debt levels would be proportionately higher as well.
Once graduated, you may not move as quickly to an upwardly mobile career as your parents. The unemployment rate for young adults today is pretty much where it usually is – close to double the national rate. The real challenge for Gen Y is not breaking in the job market so much as starting a career with growth potential.
Today, grads often have to invest time in unpaid or semi-paid internships or jobs that help pay the bills, but aren't in their chosen field. Another challenge is that employers are frequently offering young adults part-time or contract work, where wages tend to be lower and there are no benefits or pension.
Never mind buying a house – part-time and contract work makes it tough to take on long-term financial responsibilities such as renting an apartment. I listed some personal finance tips for part-time workers in a column earlier this year. The most important might be to keep a sizable emergency fund to cover a period between part-time gigs.
Higher tuition costs and a tough job market put added pressure on millennials to be smart money managers at a young age. There's much less of a margin for error when you owe more at graduation and have less opportunity to pay it off quickly.
Another difference for Gen Y – you'll be more financially dependent on your mom and dad than they were on their own parents. As noted in a column from back in the spring, young adults are commonly receiving financial help from their parents into their 30s. Whether you think you'll need it or not, prepare the way for a financial lifeline from your parents by discussing what assistance they're willing to offer and under what conditions.
You might need to move back home after graduation if you don't have a job that pays enough to cover rent. Are your parents okay with that and, if so, what would they expect from you?
Many of today's young adults will have to make more financial compromises than their parents. Those who want to save for a home may have to give up things like travel, owning a car and renting in a cool downtown neighbourhood. Or, Gen Y could end up buying houses later, say in their late 30s. That suggests they'll get their mortgages paid off later in life than their parents.
Gen Y will also have to be open-minded about alternatives to traditional home ownership. For many parents, home ownership is a defining characteristic of their lives. But at current levels, house prices will force many young people into renting and/or owning homes they share with relatives or other families. They'll also have to look at raising kids in condos.
Finally, Gen Y, you'll be more responsible for covering your retirement costs than your parents. Fewer pensions and longer lifespans will require you to save make a religion of retirement saving.
Personal Finance on Campus