Tag Archives: millennials

Jul 18: Best from the Blogosphere

18 Jul

By Sheryl Smolkin

We recently posted the blog Rent vs Buy: A Reprise, but the subject of when, or even if millennials will ever buy homes seems to be a continuing theme in both the blogosphere and the mainstream media.

Its not surprising that issue is still a live one, particularly in cities like Vancouver and Toronto where housing prices have gone through the roof and only young people with great jobs and a hefty gift from the Bank of Mom and Dad can get their foot in the door.

Several months ago BMO published the report Rent-Weary Millennials Not in a Hurry to Become Home Owners; Need to Save Accordingly. In the prairie provinces, people age 19-35 gave the following reasons why they are delaying home ownership:

  • 27%: Don’t feel comfortable making such a large purchase at this point in my career
  • 46%: Other priorities take precedence (such as traveling, continuing education or starting a business)
  • 33%: Don’t want to be left with no disposable income
  • 40%: Not sure where I want to settle down
  • 27%: Have to pay off debt first

In a Huffington post blog, Jackie Marchildon asks Are Millennials Choosing To Rent, Or Just Choosing Not To Buy?  She argues that renting is its own lifestyle and although currently dominated by millennial city dwellers in Toronto and Vancouver, it is not unique to this generation, nor to their respective cities.

On the Financial Independence Hub Helen Chevreau (daughter of well-known personal finance guru Jonathan Chevreau) says she is  Young, saving, and hopefully one day will buy a house. She critiques an article about “Tony” in Toronto Life who would rather spend his generous pharmacist’s salary on exotic trips and lavish spending than be shackled by a mortgage. She advocates for a happy middle ground: “somewhere between throwing down $1,500 on a meal and stealing toilet paper from the bathroom of the bar to save a few bucks.”

Another perspective comes from a young married couple who is saving up for a cottage because “they don’t want to invest their money in a shoebox.” They are also paying off student debt ($700/month) and spending $300/month on dog walking for their new Labrador mutt puppy.

Rent to Own | Option to Purchase is an interesting article by Saskatoon lawyer Richard Carlson. “There is no such thing in law as a ‘rent to own agreement.’ The idea was made up by people who wanted to sell to someone who did not qualify for a mortgage,” he says. “There is a good chance it will lead to a problem and a dispute.” He also distinguishes “rent to own” from an “option to purchase” which comes with its own set of challenges. Bottom line is, get independent legal advice before you enter into one of these questionable arrangements!

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Retirement savings: Are the kids alright?

4 Feb

By Sheryl Smolkin

A pair of surveys recently released by Tangerine Bank and TD Bank show that many millennials started saving for retirement in their early 20s, but they do not have a clear understanding of how much to save or how their RRSP savings can be used in future.

A new survey by Tangerine found that the younger generation of Canadians is getting the message to start saving early and build a nest egg for retirement. Despite being in the early stages of their career or still in school, the survey revealed that 62% of millennials (those 18-34) have started saving for retirement and almost half (46%) said they started before the age of 25.

These results are even more impressive when compared to data collected from the 81% of older working Canadians aged 35-65 who are currently saving for retirement. When asked when they began saving, only 18% reported to have started before the age of 25.

Of those 38% of millennials not yet saving for retirement, many (62%) say it’s because of their low salary or not having enough money, and another 23% said it’s because they are saving for a big ticket item like a house, a wedding, or travel.

Nevertheless across the different age groups, the survey’s findings were uniform when it comes to financial literacy. Fifty eight percent of both millennials and older working Canadians felt they did not learn enough about saving for retirement before they started.

This is consistent with the findings of a late 2015 Environics poll conducted for TD bank which found that many millennials are unaware that RRSP funds cannot be used for other items such as making a charitable donation (64%), paying childcare expenses (60%), financing a car (52%), making a personal loan (51%), renting an apartment or purchasing a second home (50%).

Half (50%) of all millennials surveyed by TD correctly identified that RRSP funds can be used for first time home purchase, although just 28% were aware they can be used to fund full-time education as a mature student.

“Saving enough money for a down payment on a home can be difficult for many younger Canadians, so the ability to withdraw up to $25,000 from an RRSP, or up to $50,000 for a couple, can help make it easier,” said Linda MacKay, Senior Vice President, Personal Savings and Investing at TD Canada Trust. “Building up an RRSP from the earliest possible moment not only helps you save on income tax now, but could also help get you into your first home more quickly and lower your monthly mortgage payments down the road.”

But Lee Bennett, Senior Vice President, TD Wealth Financial Planning says there are pros and cons and long-term implications of using RRSP funds to buy a home or pursue further education, including giving up the potential growth of RRSP savings until that money is repaid into the plan. As with any significant investment decision, she recommends investors consult with a financial planner who can help explain what’s best for each individual.

MacKay agrees, adding that it’s important to have a bit of know-how and understand clearly what an RRSP can – and cannot – be used for in order to avoid incurring tax penalties for improper withdrawals and to be able to maximize the amount of money that can be saved. She says this applies particularly to millennials who, as the TD survey shows, have many misconceptions about how an RRSP fund can be used.

You can find basic information on How RRSPs work and Making RRSP withdrawals before you retire on the Ontario Securities Commission’s web site GetSmarterAboutMoney.ca and a more comprehensive discussion from the Canada Revenue Agency at RRSPs and related plans.