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Posthaste: Gen Z, millennials relying on 'bank of mom and dad' to meet financial goals

·7 min read
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Good morning!

A majority of young Canadians are relying on the “bank of mom and dad” to meet their financial goals, according to a new study by Edward Jones Canada.

In fact, over half (55 per cent) of generation Z and millennials (aged 18-34) need a financial inheritance or windfall to reach their goals, according to the survey. That’s 13 per cent higher than the national average.

But while the younger generations are most likely to receive a wealth transfer, they are also the most likely to give one. The study found that 14 per cent of the younger cohorts have initiated a wealth transfer since the beginning of the COVID-19 pandemic in March 2020. That’s in comparison to just one per cent of those aged 35-54 and four per cent of those aged 55 and above.

“We’ve all heard about the ‘bank of mom and dad’ supporting the younger generation through wealth transfer, but our data demonstrates a strong willingness from the younger generation to return the favour,” Julie Petrera, senior strategist of client needs at Edward Jones Canada, said in a press release. “It is a timely reminder that our strategic approach to finances shouldn’t be defined by what’s considered normal or traditional, but by what matters most to you. Your unique circumstances, goals, and priorities should be the foundation for these significant financial decisions.”

Overall, a quarter of gen Z and millennials have given and/or received a wealth transfer since the start of the pandemic, which is 11 per cent above the national average.

The reasons behind initiating wealth transfers seem to differ by age. The younger generations used wealth transfers to address immediate needs such as personal financial (38 per cent) or economic (33 per cent) factors, major purchases (25 per cent) and significant life events (18 per cent).

For the older cohorts, wealth transfers were largely prompted by the death of a family member or friend: 51 per cent for those aged 35-54 and 63 per cent for those aged 55 and above. In comparison, it was much less of a factor for gen Z and millennials at just 28 per cent.

“The transfer of wealth is something that is deeply personal and different for each client,” said Petrera. “Whether you plan to leave an inheritance or windfall before or after death, it’s important to understand the complexities associated with your unique situation and develop a tailored plan that helps ensure your wealth is given or received efficiently and without conflict.”

In general, the survey found that a majority (54 per cent) of Canadians are looking to pass on at least a portion of their inheritance during their lifetime. The top reasons for transferring wealth are to ensure it is distributed without conflict (34 per cent) and to give immediate financial relief to a family member or friend (27 per cent).

However, this year’s number is significantly lower compared with a year ago when 65 per cent of Canadians were hoping to do the same. The leading cause of hesitation for almost half (45 per cent) of Canadians was risking their own financial future. Other reasons include tax implications (19 per cent), the absence of an immediate need (18 per cent) and undeserving recipients (18 per cent).

Still, experts anticipate an era of unprecedented wealth transfer over the next decade. Indeed, estimates of Canadian inheritances are expected to reach as high as $1 trillion.

The great generational wealth transfer has already been fuelling the luxury property market. Sotheby’s International Realty Canada chief executive Don Kottick said in an interview with Larysa Harapyn last year that wealth transfers are the reason many millennials have been able to move up in the housing market.

“At this time, we … are starting to undergo the largest wealth generation transfer that we’ve ever experienced,” Kottick said. “(Millennials) basically have skipped the first-time home buyer — they’ve moved straight to single-family dwellings.”

The Edward Jones survey interviewed 1,517 Canadian adults aged 18 and above.

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GOLD WILL BE UNLEASHED The CEO of Agnico Eagle Mines Ltd., the largest producer of gold in Canada, said he’s confident that gold prices will break out of a months-long slump, and characterized his investment in a Mexican copper project as opportunistic, not a pivot from precious metals. Gold appears to be suffering because the U.S. Federal Reserve and other central banks have been raising interest rates so quickly in recent months, making fixed-income assets such as bonds more attractive. As soon as the Fed stops raising interest rates, “gold is going to be unleashed and it’s going to go up,” Agnico chief executive Ammar Al-Joundi said. The Financial Post’s Gabriel Friedman reports. Photo by Sean Kilpatrick/The Canadian Press

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  • Statistics Canada to release travel figures between Canada and other countries for July.

  • Infectious disease, emergency medicine and pandemic management doctors will release a report entitled “Evaluating Canada’s Pandemic Border and Travel Policies: Lessons Learned” where they assessed the impact and effectiveness of federal travel restrictions introduced to manage COVID-19.

  • The standing committee on international trade holds a meeting about trade opportunities for Canadian businesses in the Indo-Pacific.

  • The standing committee on environment and sustainable development holds a meeting about clean technologies in Canada.

  • Prime Minister Justin Trudeau will hold a bilateral meeting with the president of South Korea, Yoon Suk Yeol. Foreign Affairs Minister Melanie Joly and Francois-Philippe Champagne, minister of innovation, science and industry, will also be in attendance.

  • Prabmeet Sarkaria, president of the treasury board of Ontario; and Peter Bethlenfalvy, Ontario minister of finance, will release Ontario’s 2021-2022 public accounts.

  • Arielle Kayabaga, Liberal MP for London West; and Monte McNaughton, Ontario minister of labour, immigration, training and skills development, will make an announcement regarding broadband infrastructure.

  • Gudie Hutchings, minister of rural economic development; Nate Glubish, Alberta minister of service; and George Chahal, Liberal MP for Calgary Skyview, will make an announcement about improving high-speed internet access in rural Alberta.

  • Minister of Education and Child Care Jennifer Whiteside and Minister of State for Child Care; Katrina Chen join Karina Gould, federal minister of families, children and social development, for an announcement about child care savings in B.C.

  • Today’s data: Canadian retail sales; U.S. S&P global manufacturing PMI

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A majority of Canadian companies put inflation on the top of their list of concerns for the remainder of the year, signalling the country’s year-long struggle with inflation is putting a strain on business owners. The Canadian Survey on Business Conditions found that 60 per cent of respondents considered high inflation to be the biggest near-term challenge — the highest level of concern recorded since the survey began in the spring of 2020. “Businesses are pretty much struggling with costs,” said Canadian Chamber of Commerce chief economist Stephen Tapp. “Running a business right now, it’s extremely expensive and it’s hard to do given lack of access to workers and input costs rising pretty considerably.” Read the full story by the Financial Post’s Stephanie Hughes.

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You might be considering the purchase of an electric vehicle as we move toward 2035, when all new vehicles sold must be electric. If you’re in the market for a new vehicle, but the price of an EV seems too steep, you should be aware of the federal and provincial rebates available for the purchase of an electric vehicle. Our content partner MoneyWise Canada has details on how to apply for the rebates and cut down on your costs.

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Today’s Posthaste was written by Noella Ovid, with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.

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