Above All, Save!

MNP's TAKE: Young professionals today are struggling to navigate through multiple financial challenges. Many are carrying significant student loans, dealing with an inflated housing market, trying to keep up with an ever increasing cost of living and for some, also dealing with the financial costs of being a part of the sandwich generation - where they find themselves responsible for bringing up their own children while also financing the care of ageing parents. After all this, it's no surprise young people feel they don't have the time or resources to even consider budgeting for retirement. 

While the Canadian government may have found a way to boost the Canada Pension Plan (CPP), it's still important for young adults to set aside funds for retirement, given the fact that we really won't know what the CPP will look like by the time Canadian millennials reach that point in their lives. Given the common financial obstacles detailed above, setting aside retirement funding doesn't always make it to the top of the priority list. There is a way however, to set yourself up for a strong financial future, while taking care of your day-to-day expenses (and even living a little)!

Creating a budget might help you find a little more room than you expected to set aside money for your future. Write down everything from your monthly telephone bill to your chocolate habit. Once you know exactly where your money is going, you might find there are areas you can cut or reduce in order to boost your saving capabilities. Perhaps you could replace your daily coffee run with a good home brew or replace your hefty cable bill with a more affordable streaming service? A few compromises here and there and you may find you're in a position to start planning for a retirement you can really look forward to! 

If the cost of living already has you struggling to keep afloat, and debt is beginning to take hold of your finances, you still have options. Contact Grant Bazian, CIRP, LIT, President of MNP Ltd. at 778.374.2108 or grant.bazian@mnp.ca to discuss what debt solutions may be available to you.

People who lived through the early 1980s tend not to recall that era of double-digit unemployment, inflation and mortgage rates with much wistfulness.

Those years did constitute a golden age in one respect, though.

Canadians socked away more money than ever before or since – 19.9 per cent of net income in the second quarter of 1982.

Today the figure is under 4 per cent, at the low end of G20 countries, and trending downward. Making it worse, the growth in Canada’s household debt leads the industrialized world. Canadians simply aren’t saving enough, and something needs to be done.

This is important for many reasons. Here’s one: Economic growth is increasingly a function of consumer spending, itself a function of folks’ willingness to go into debt. History and macroeconomic theory both dictate that interest-rate increases are inevitable in the medium term. So what then?

Ontario Premier Kathleen Wynne argues there is an urgent need for government to act on retirement savings by increasing public pension payouts, a contention disputed by pro-business lobbies and some provincial finance ministers.

It’s true there are consequences to higher payroll taxes in the form of increased pension contributions, but the balance in this debate should favour those Canadians – perhaps as many as six million of them – who face the prospect of financial hardship in their retirement.

People used to be able to put money away thanks to the forced savings of paying down a mortgage. But, because of rising housing prices in major cities, this is available to fewer and fewer young people. Meanwhile, the number of employees paying into private or public pension plans is decreasing.

Ms. Wynne and others believe the best option is to expand the Canada Pension Plan, a position supported by three in four Canadians, according to a recent poll. Simpler and, perhaps, better alternatives may exist. Governments can coerce but they can also nudge (think: tax-free savings accounts).

But while there is a need to debate the question of what to do, the real issue is the urgency. At this point, the specifics of the answer matter less than the imperative to find one.