Twenty-four-year-old Jason Francone has always been pretty good with his money.
“Coupons are my middle name; sales are in my DNA,” he says.
However, it is not only the art of bargain hunting that he masters. Francone has also been saving in other ways and working to build wealth since he was a teenager.
But skyrocketing inflation, a soaring housing market, rising interest rates and a struggling stock market, combined with his jumping from one landscaping job to another over the past few years, have left Francone nervous about your long-term financial goals. like retirement.
“Inflation and other economic pressures have definitely been a huge drain and a distraction on my savings,” he says.
Francone said his ability to save for retirement will be a major concern until he finds a more stable job. In the meantime, he stopped making monthly deposits into his savings and investment accounts to help ease some of his financial worries.
Although it may seem like years away, saving for retirement is a top priority among 26 percent of Canadians aged 18 to 34, according to a recent survey by the Ontario Health Pension Plan (HOOPP). Yet 79 percent of respondents in that age group say saving for retirement is prohibitively expensive, 35 percent haven’t saved anything for retirement yet, and 37 percent say they haven’t saved anything in the future. last year.
Personal finance experts believe the current economic climate will likely cause financial problems for many young adults, no matter how careful they’ve been with their money, but it won’t necessarily derail their path to retirement entirely.
“I think it will certainly set them back, but it all depends on how long this business cycle lasts,” says financial planner Jackie Porter.
She cites the impact the 2008 recession had on older millennials in the 35-42 age range and how some have recently recovered financially. The 2008 recession lasted about seven months in Canada and 18 months south of the border.
“Young Canadians will need to save between eight and 12 times their income if they want to retire at age 65,” says Porter.
Access to workplace pension and benefit programs is key to helping young adults get on track for a comfortable retirement, it adds. Statistics Canada says that 35.7 per cent of the main household breadwinners under the age of 35 have an employer-sponsored registered pension plan.
Francone hasn’t had access to those programs because he’s only been offered short landscaping contracts and says it’s very difficult to get on the full-time list where he could participate in savings programs.
“While I made good money, I was never really introduced to saving money for retirement or a pension or even for benefits,” he says.
Home ownership is another part of the retirement equation, as it has often been a vehicle used to finance retirement. The HOOPP survey found that saving for the purchase of a home or property was ranked first by 48 percent of respondents between the ages of 18 and 34, in terms of priority.
For Francone, who currently lives at home with his parents due to the high cost of rent, owning a property is “extremely important.”
“Although the goal and the idea of it may be further away than expected at this age, it still hasn’t changed in its level of importance,” he says. “It’s important that I live in a place that is mine, that way I can be in full control of my future.”
Money coach and TikToker Ellyce Fulmore has a slightly different take on homeownership and doesn’t think young adults should rush into the market.
She argues that a home isn’t always the great investment that everyone thinks it is because of all the expected and unexpected costs involved. There is also the risk of having to sell it at a loss.
“Your house shouldn’t be your retirement plan,” she says.
Fulmore has received many questions from his audience, largely Gen Z and young millennials, about saving and investing for retirement.
“I think most people in my age group feel the pressure to start investing for retirement, they save money, but they also feel like they don’t know where to start,” he says. “The fact that finances are tighter right now is an added load of stress on top of figuring out what to do.”
To help navigate the current economic climate and keep retirement ambitions on track, especially as the possibility of a recession increases, Fulmore urges young adults to prioritize an emergency fund and build it as much as they can. She suggests having nine to 12 months of expenses saved in a high-interest savings account since the cost of everything keeps rising.
She also believes that young adults should keep their existing financial plan intact, despite all the noise out there.
“The important thing is to continue doing what you can instead of stopping everything completely as your first instinct,” says Fulmore.
This report from The Canadian Press was first published on July 5, 2022.