A dad recently wrote to me about his daughter’s housing situation. She’s a recent university grad working two jobs in Toronto and renting a condo with her boyfriend for $1,800 per month. “Will my daughter … ever be able to afford a house or condo in Toronto?” he asked.
He’s worried because Toronto is such an expensive place to live. His own thought: Consider living in a city just outside Toronto, where home prices are more affordable. His daughter’s response? “The suburbs – that’s hilarious.”
I think it’s too soon to make any conclusions about whether a hard-working young adult will be able to buy a condo or house in the city or elsewhere. There’s no reason people can’t buy a house at age 35, pay it off in 20 or so years and then save aggressively for retirement. This isn’t an ideal way to save for retirement, but it’s a pragmatic compromise.
Houses are so important in our society that it’s almost like young adults are put on an ownership clock as soon as they graduate. How stifling. I am more impressed by a young couple working hard to live the big city life than I am by precocious 20-somethings shackling themselves to the demands of home ownership. There’s value in building up home equity, for sure. But there’s at least as much value in building up life experience and the career benefits of being able to accept jobs in other places without a house to complicate things.
I’ll hazard a bet that this young woman will own a house sometime in the future, and I suspect she may have to settle for the suburbs. But that will be years in the future. For now, she should enjoy life in Toronto and save every dollar she can.
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Rob’s personal finance reading list…
How to get started in investing
The My Own Advisor blog does a nice job here of running through the various options open to a novice investor who wants mainly to be a do-it-yourselfer. Ideal intro for millennial and Gen Z investors.
The future of affordable housing
Introducing co-living, where you share an urban dorm-like space with other tenants. This solution to expensive rentals has been used in Europe and the United States, and now it’s appearing in some Canadian cities. You get a private bedrooms, but share common areas like a kitchen.
The tough love view on allowances for kids
A good point raised here is that parents should be clear with their kids about what allowance money is supposed to cover, and that both needs and wants should be included. Helps teach kids to live within their means.
How to make your jeans last longer
Some say you should never wash your jeans, but that’s gross. Here’s a more reasonable plan for maintaining your investment in denim.
Today’s financial tool
This personal information inventory is a handy way to gather up the details that a spouse or loved one would need if you were incapacitated or died suddenly.
Ask Rob
Q: My bank has pre-approved me for a higher credit limit on my credit cards. I always pay off my credit card every month. If I accept this credit increase will it affect my credit ratings? I’d appreciate your pros and cons on high credit limits.
A: A higher credit limit gives you more borrowing room, and that could affect your credit score in a mildly negative way. But the main factor is how prompt you are at repaying what you owe. Sounds like you’re good on that count. A higher credit limit makes sense if you want to make big purchases and then pay them off right away to earn reward points. The obvious downside is that the higher credit limit could entice you to over-spend.
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.
In case you missed these Globe and Mail personal finance-related stories
- How a semi-retired man with ‘limited resources’ can figure out his expenses and stop working
- For many working parents, paying for a patchwork of summer camps is an annual financial burden
- The rise of ETFs is making life miserable for Canada’s mutual fund industry
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Rob Carrick