One of the biggest dead ends in personal finance today is blaming young adults themselves for the difficulties they’re having in today’s economy.
Many people are willing to do so. I can tell you that from the surprisingly vitriolic responses from readers after writing about millennials and their challenges (the responses to this newsletter were off the charts). Here’s a milder example of the “what’s wrong with these kids?” narrative – a recent blog post about what parents can do about children who refuse to become financially independent.
As with every generation since we lived in caves, there are young adults today who are lazy and feel entitled to the good life without working for it. Dwelling on this small minority of young people means we’re not talking about much more important matters, like why today’s work force can’t supply enough full-time, career-building jobs with benefits for young people.
This is a multi-faceted problem: Some young people are incurring big debts as they take university courses that give them weak prospects for work, while many employers are cycling young workers through temporary contracts rather than hiring them full-time. Meanwhile, house prices keep climbing in some cities, and the cost of renting is going up as well. Parents, schools, colleges and universities, politicians and employers should be talking more about these issues than they are.
That blog post for parents of kids who have failed to launch has some suggestions for parents who want to encourage their children to be financially and socially responsible, including allowances, charging rent to adult kids living at home and paying only the cost of a first degree. Teach your children well, and then educate yourself on what young adults are up against today. Here’s a good place to start: ‘I can’t even get a job waitressing’: Gen Y on its work woes.
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Rob’s personal finance reading list …
Take CPP at age 60?
A financial planner lists some things to consider when deciding whether to take Canada Pension Plan retirement benefits early. You can start as early as age 60 with a reduced benefit, or wait as late as 70 and get additional benefits beyond the standard amount. Here’s a calculator we designed to help people decide when to take CPP.
Her income went up – so did her spending
“As my salary increased, so did my sense of entitlement,” a blogger writes. A good take on lifestyle creep – where you end up spending more as you make more.
Stop moping about Canadian stocks
An investment firm explains why you should diversify your stock-market holdings in Canada, the U.S. and internationally, even if Canada is well on its way to yet another year of sad underperformance. You never know which market will take off in 2019.
Social media is bad for your finances
A majority of young adults feel influenced to spend beyond their means by what friends and celebrities are doing on social media. Mass media – notably the internet and social media – has not been given its due in explanations of why debt levels are so high. It’s not just low interest rates.
Today’s financial tool/app
I get asked a lot about how to find a fee-for-service financial planner who charges a flat or hourly fee and doesn’t sell investment products. Here’s a detailed list of planners of this type.
Ask Rob
Q: My grandson, age 22, is just about to invest $15,000 in a self-directed RRSP. He will not be an active trader. Where can he learn about the different fees that might be charged annually?
A: It sounds like your grandson will be using an online brokerage account, which means he’ll have to watch out for three layers of fees:
- Account inactivity or admin fees: Charged to small accounts with balances up to $15,000 or $25,000; $25 per quarter is common.
- Trading commissions: Figure on as much as $10 or so per buy or sell transaction for stocks and exchange-traded funds.
- Fees charged by ETFs or mutual funds: These fees are taken off the top of gross returns, so your grandson will be seeing net returns in his account.
Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.
Featured video
Here’s a briefing on how to squeeze all the useful information out of your investment statements.
What I’ve been writing about
- Bank of Canada wants rates back to normal – here’s what that means for your mortgage, line of credit
- What if the stock market busts just as you retire? (for Globe Unlimited subscribers)
- ‘Is now a good time to have a five-year GIC ladder?’ (for Globe Unlimited subscribers)
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Rob Carrick