Parents’ Financial Advice: Millennials & Gen Z Need a New Approach
A new financial landscape is emerging, demanding that younger Canadians re-evaluate the traditional advice often passed down from older generations. The established rules of wealth management, shaped by decades of rising home prices and stable employment, are proving increasingly inadequate for a generation facing dramatically different economic realities. This shift is prompting a critical examination of the financial guidance provided by parents, with experts emphasizing the need for a more adaptable and personalized approach.
The core of the issue lies in the diverging economic forces impacting millennials and Generation Z. The skyrocketing cost of real estate, coupled with the increasing expense of education and raising a family, has created a vastly different environment compared to previous generations. Furthermore, the radically altered employment landscape, characterized by precarious work and a decline in traditional pension plans, makes many established financial strategies less relevant. As Brenda Hiscock, a certified financial planner at Objective Financial Partners Inc., succinctly puts it, “We’re in a different world now.” This necessitates a fundamental reassessment of long-held assumptions about homeownership and financial security.
Many millennials and Generation Z Canadians find themselves unable or unwilling to follow the traditional path laid out by their parents. The expectation of purchasing a home – often described as the ‘white picket fence’ – has become increasingly unattainable for many due to the significant financial burden involved. Ainsley Mackie, portfolio manager at Verecan Capital Management, stresses the importance of recognizing this shift and rejecting outdated benchmarks. “People shouldn’t hold themselves to the same standards as their parents,” she argues. Instead of focusing on homeownership, renting can be a more financially viable option, allowing young adults to conserve capital and invest in long-term growth. This flexibility is particularly valuable given the increased opportunities for travel and personal development.
Key life milestones – such as securing a full-time job, achieving financial independence, establishing a stable living situation, getting married, and starting a family – are now occurring later in life for this generation. Research, including a 2023 study by Pew Research Center, indicates a significant delay in these milestones compared to previous generations. This delayed timeline further underscores the need for a more adaptable financial approach. The increased difficulty in achieving traditional milestones prompts a re-evaluation of priorities and a willingness to deviate from established norms. A 2022 survey by Leger on behalf of Royal Bank of Canada’s youth money management app Mydoh, revealed that more than half of Canadian parents feel like their own parents were not proactive enough in teaching them about money.
A common but often detrimental perspective among millennials and Gen Z is the belief that all debt is inherently bad. Driven by anxieties over mortgage payments and savings, many young adults become overly focused on paying off their debts, often at the expense of long-term investing. Ainsley Mackie observes this tendency, stating that individuals become hyper-focused and anxious about their mortgages while neglecting savings initiatives. However, responsible credit card use, when coupled with disciplined repayment, can be a valuable tool for building credit and expanding financial opportunities. It provides convenience, builds credit scores, and may offer rewards programs. Equally important, low-rate mortgages, coupled with strategic savings in registered retirement plans (RRSPs) and tax-free savings accounts (TFSAs), can accelerate wealth accumulation and help individuals meet their financial goals sooner.
Traditional financial advice, frequently dispensed by parents, often fails to address the specific challenges faced by this generation. The advice to stick with one employer for life, driven by a desire for stability and loyalty, is increasingly out of sync with the realities of a rapidly changing workforce. Jessica Moorhouse, a money expert and financial counselor, acknowledges this disconnect, noting, "I was really only able to start doing that in my 30s, when I had a little bit more sense of myself." The rise of flexible working arrangements and jobs that didn’t exist decades ago, coupled with the decline of traditional pension plans, further complicates matters. Recognizing the need for adaptability, individuals should question the inherited instincts and, if necessary, move beyond them. Furthermore, parental financial trauma can significantly impact one’s relationship with money.
The shift starts with acknowledging how ingrained outdated financial beliefs and anxieties may be. A 2022 survey by Leger on behalf of Royal Bank of Canada’s youth money management app Mydoh, revealed that more than half of Canadian parents feel like their own parents were not proactive enough in teaching them about money. Another 46 per cent of respondents felt they needed to unlearn unhealthy financial habits, such as not having a budget, not saving a set amount each month or going into debt. Inherited financial beliefs and traumas can impact one’s relationship with money, leading to poor financial choices, stress or limiting beliefs. Recognizing them is an important first step in breaking the cycle and developing healthier, more empowering relationships with finances.
Ultimately, a personalized approach is essential. As money expert and financial counselor Jessica Moorhouse argues, the journey to financial freedom may require questioning your parents’ instincts—and letting them go if they no longer serve your needs. In her book, Everything But Money: The Hidden Barriers Between You and Financial Freedom, she writes in part, “It really has to do with identifying where (your fears are), and those can come from your parents, and maybe (you) need to let them go, because that’s their story, not (yours).” By proactively challenging assumptions and embracing a more tailored financial strategy, younger Canadians can take control of their financial futures.
