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Lifestyles of the poor and educated: How Generation Y is establishing new financial norms

In cities across Canada it's becoming more and more difficult to spot those who are living below the line of financial security. The next time you're on the subway or sitting in a crowded movie theatre, look around. That 20-something who's playing on her smartphone? She likely has $50,000 worth of student debt and lives in her parent's basement. Sure, she's well-dressed and carrying an expensive handbag, but look closer. Her finger nails are chewed to the quick and that's not Facebook on her phone — it's the local job board.

Depending on who you talk to, Generation Y has it easy. Entitled, independent and coddled, these "kids" have grown up in a world collapsing in size and spinning faster than any other period in history. Sheltered from life's unpleasant realities by overprotective parents, Gen Ys have grown up being told they're great, that they're winners, and that they can achieve whatever they put their minds to.

Except that's not exactly the case. Just ask the girl on the subway. [More: How the shift towards hiring mature workers is affecting employment economics]

As Generation Y matures, so too does their understanding of life. Instead of encountering a world of possibilities, Canada's youth are fighting a losing battle with unemployment, inexperience and dislocation that's creating a new subculture of desperation.

The numbers don't lie

Being young in the current economy, well, sucks. In Ontario, the minimum wage is $10.25. A student who puts in a 40-hour workweek for 12 weeks will make $4,900. That's a sizable shortfall on tuition, living costs, housing fees… and it's the beginning of the end of financial self-sufficiency.

According to Canadian Social Trends, a study that uses data from Statistics Canada's General Social Survey, the majority of Canadians aged 20 through 29 live with their parents. In 1986, only 28 percent of 20-something boomers were crashing on mom's couch.

Not surprisingly, far fewer Canadian youth are now married or in a common law relationship. Approximately 33 percent of Generation Y individuals are currently in a serious relationship, compared to 37 percent for Gen X and 48 percent for the baby boomer generation. [More: How to break down and pay off your student debt ]

Dead end jobs

But just because they're living at home doesn't mean they're spending the day watching Real Housewives. Young Canadians are working, but most are in dead end jobs that don't match their credentials. For thousands of young people, the transition from school to employment has been anything but smooth. According to new analyses by Statistics Canada, one in five young Canadians want a job (whether or not they are actively looking for one). But wanting and finding are two very different things. Even though Canada's job market created 213,800 positions over the past year, very few were targeting Generation Y.

In fact, youth are the only demographic group that has not benefited from the past year's employment increases. Last month, there were 17,200 fewer youth employed in Canada than a year ago and the jobless rate for young people between the ages of 15 and 24 years old remains at 13.9 percent. The broader youth unemployment rate (which includes those waiting for a job to start and discouraged workers) is hovering around 20.4 percent, according to Canadian Labour Congress.

Gen X versus Y

For Generation Xers, things were pretty cut and dried — get a degree, get a job, get paid. But that's not the case for millennials. The pool of young, ambitious and educated individuals is huge and it's growing exponentially faster than the job market. So what's a young person supposed to do to make ends meet?

For many, mooching off mom and dad simply isn't an option (thank goodness). So, in a last-ditch attempt at financial independence, many Gen Yers are turning to alternative financial products in order to make ends meet. It isn't pretty, but according to recent data from Think Finance, a Texas-based online financial products provider, it's becoming more and more the norm. [More: 5 things NOT to teach your kids about money]

Narrowing down the choices

Traditional thinking would have Generation Y focused on a financial plan that combines registered retirement products and scaled down lifestyles. But, according to the Think Finance study, young people across the spectrum are putting their need for convenience, utility and flexibility ahead of fiscal responsibility. And while today's financial marketplace offers consumers a broad array of choices on how to handle their financial affairs, not all available products are beneficial.  The question is, can young adults tell the difference?

Tips for Gen Y to get by — and get ahead

  • Instead of using a check cashing service, which often charges high fees, ask your employer about direct deposit options. This can often be set up at your bank for no additional fee.
  • Rather than taking out a payday loan, a service that yields high fees and a short repayment period, consider borrowing from friends, family or a peer-to-peer lending website (social lending).  Another option: a pre-paid credit card for when you're in a pinch.
  • Items in a rent-to-own store are over-priced and dripping in additional fees. Instead of wasting your money, hit up garage sales or second-hand stores in order to find great used items. If you're bound and determined to purchase a new item, ask the store clerk about available layaway plans. This will help you pay down the item without a lot of additional interest charges.
  • Best of all, buy into the notion that saving is underrated.  An emergency fund — however small to start - will prevent the need to use high-cost and destructive financial products or services.

When less means more

From the Quebec student protests to reports of youth unemployment, there are no shortage of stories suggesting young people are facing tough economic times. Indeed, it's not surprising that millennials at all income levels are having to resort to less-than-stellar financial products and services.  And although there is some merit to the financial community addressing the needs of challenging times, young individuals also need to understand that less (consumerism) really does mean more (security, stability and yes, opportunity). [More: Canadian teens are overly optimistic about their future earning potential]

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Nothing contained herein is intended to provide personalized financial, legal or tax advice. Before implementing any financial or legal strategy, you should obtain information and advice from your financial, legal and/or tax advisers who are fully aware of your individual circumstances, as well as fully aware of current laws and regulations.

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