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Here's why many millennials are putting off the 'age of responsibility'

(Getty Images)
(Getty Images)

In 1997, Canadian households spent on average $49,005 in total household expenditure (from mortgage fees to electricity). By 2009 this number rose to $71,117.

Zip to 2013 and total expenditure was $69,276 for those aged 30 and younger; $85,724 for the 30 to 39 age bracket; $95,481 for 40 to 54 year-olds; and $82,483 for the 55 to 64 year-olds. Except for the under 30 demographic, these averages were more costly than the overall Canadian expenditure average which in 2013 was $79,098, annually.

By 2017 this figure has gone up a little for the under 30 demographic ($76,621) with the biggest jump seen in those ages 30 to 39 (total expenditure was $96,646), followed by 55 to 64 year olds ($90,564) and then the 40 to 54 year-old bracket whose total household expenditure was $103,175, according to the 2017 Survey of Household Spending (SHS).

The total household expenditure for Canadians rang in at $86,070 in 2017, the report found, which is again lower than most of the specific age tallies mentioned. Data for 2018 was not collected and the next set of data will be measured in 2019 and available come 2020.

Things like transportation, housing and food are all essentials that Canadians consider, and the impact of price increases and decreases depending on spending habits and types of purchases. But what’s being purchased has been changing over the years.

“We are shifting from an economy of buying stuff to seeking experiences,” says consumer expert Tony Chapman who recently launched a new talk series called From a Place to Buy to The Place to Be which discusses the experience economy. “This has been driven by mobile phone that has brought the world within arms reach of desire, the fear of missing out (FOMO), likes from friends and like-minded people, and the need to create a persona online that is based on many cases of smiles and having a good time [experiences].”

As the FOMO persists, prices of food continue to rise and according to the ninth edition of the Food Price Report, Canadian families on average will spend $411 more in the next year on groceries. In total Canadians are expected to fork out $12,157 this year on food expenditure.

The report also said food prices will rise between 1.5 per cent and 3.5 per cent, and both meat and seafood will be cheaper—the first drop in price for the two since the report’s inception. More Canadians are opting for plant-based proteins which shifts the focus away from meat; a change from 1999 where meat was a staple protein to consume regularly.

A Canadian snapshot: then and now

In 2008, the average individual income was $37,000 per year. Milk (partly skimmed) cost $1.99 and eggs were $2.57 a dozen. Rewind to 1985 and income reached $15,903 per year with milk running at 98 cents a litre and eggs costing $1.37 a dozen. From 1938 to 2008 food prices in Canada went from $3.15 on average to $55.04, according to Statistics Canada. The price of a pound of bacon went from 68 cents in 1935 to $8.90 in 2008. A pound of sirloin steak went from 51 cents in 1938 to $15.39 in 2008.

As for 2018, a pound of sirloin steak varied between $17.58 to $17.94 in November 2018. Vegetables continue to go up in price as well–in 1997 a kilogram of carrots cost $1.21 and in 2018 this price rests at $1.78 per kilo.

Canadian households paid $12,707 for transportation in 2017, up 6.7 per cent from 2016. In 2005, this number was $8,914. And in just five years the price Canadians paid for shelter rose from $16, 361 in 2013 to $18, 637 in 2017.

In 2009, Canadian households spent $3,843 on recreation compared to $2,962 in 1999. In 2017, the recreation price ticket per household cost $3, 986.

Home entertainment services were on average $572 in 2010, per household, and this number has dropped dramatically to $233 in 2017. Looking back to 1999, a two-parent household paid $684 for home entertainment.

Are millennials worse off today?

“The biggest hurdles that millennials face today are debt, purchasing of high-fee financial products and the lack of pensions and a Registered Retirement Savings Plan (RRSP),” says Daniel Eberhard, CEO and founder of KOHO, an alternative banking solution with over 100,000 registered users.

KOHO offers Canadians a reloadable Visa card as well real-time insights, round-ups, cash back and automated savings goals to help reduce spending and associated interest fees. People can set a monthly goal for debt pay down or allocate money towards an emergency fund.

“The average Canadian spends $100 on bank fees and $750 on interest while two-thirds of Canadians don’t have enough for the account minimums that our big five banks require to avoid fees,” says Eberhard. “Many millennials, for example, don’t have access to a defined contribution retirement programs, and experts suggest a savings rate of 10 to 15 per cent may be required to afford to live comfortably in retirement. A defined benefit pension, however, is a thing of the past.”

Ebherard furthers that the Canadian savings rate (the percentage of your after-tax income saved) is only 3.5 per cent versus an all-time high of 20 per cent in 1982. He also points to mutual fund fees and how they can reduce a person’s savings (and investments) by 30 to 50 per cent over time.

This lack of security poses a threat to the stability of Canadians: many Canadians do not have an emergency fund for unexpected finances that pop up.

“Many young people are delaying the ‘age of responsibility,” says Chapman. “It’s not that they love their parents more, it’s the debt they have taken on as students and how expensive it is to live.”

Where does the extra cash go?

Findings from Mintel show that in 2018 Canadians chose to spend their extra money on experiences like entertainment (39 per cent), dining out (38 per cent) and travel (35 per cent) the most, followed by paying off debt (33 per cent) and personal treats (30 per cent). Only 27 per cent of Canadians put their cash through to investments. This mirrors the sentiment presented from Chapman that Canadians today are more about seeking experiences with our money.

So, perhaps some insight to note is that Canadians have less money to spend on the same essentials as seen in decades past and can’t keep up because of ongoing debt and jobs being ventured to AI or cut altogether. Then the lack of a planned pension plan and rising prices in things like education and food carries out the crippling money insecurity and its effect on one’s financial obligations.

“You have to also remember many kids coming of age today, 10 years ago experienced the 2008 meltdown and all that brought to families such as bankruptcies and job losses. Fear does not inspire happiness,” says Chapman.

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