Generation Z Canadians face job losses, but time is on their side – MoneySense

Young people face many of the same workplace challenges as older workers, plus some additional challenges, such as limited work experience. Yet they have one big advantage: time. Young people have more years to save and invest. If you’re Gen Z trying to improve your financial future in a shaky economy, starting now can make a big difference.

Economic outlook for Gen Z Canadians

Generation Z includes people born between 1997 and 2012, which closely matches the 15 to 24 age group used by Statistics Canada. Here’s a snapshot of their financial situation.

High cost of living

Rising prices affect everyone. Inflation, high rental costs and expensive groceries are putting pressure on young Canadians, just like older ones.

Unemployment

In one year alone, more than 50,000 young people claimed EI. This number does not include gig workers, contractors, part-time workers, or others who are not eligible for EI. This means that the actual number of unemployed young people is probably higher.

Employment

Even those who work are struggling. Many work two or more jobs to keep up with costs. A KOHO survey found that the average monthly income of Generation Z is just $1,083. Nearly half (49%) expect to take on more work in the coming year, and 70% say they feel financially unstable or only somewhat stable.

Debt

Younger Canadians tend to have less debt than older groups, but the average is still close to $8,500 per person. That is an increase of 3.84% compared to the previous year, according to Equifax.

Saving and investing

Generation Z doesn’t have much left to save. The KOHO survey found that the balance at the end of the month averaged only $9 to $16. Yet savings among this group grew by 23% year on year. That effort to save and invest, even with tight finances, is a positive sign for the future.

The long time horizon of Generation Z

When it comes to saving and investing, the length of time your money stays invested is just as important as how much you put into it. The longer your money is in an account or investment, the more interest it can earn. This is called a time horizon.

The magic of compound interest

Compound interest means you earn interest on both your original money and the interest it has already earned. For example, this is what happens if you invest €100 at an interest rate of 2%:

	Starting amount	Interest earned	Final amount
Month 1	$100	$2	$102
Month 2	$102	$2.04	$104.04
Month 3	$104.04	$2.08	$106.12
Month 4	$106.12	$2.12	$108.24
Month 5	$108.24	$2.16	$110.40

Savings accounts and GICs are examples of investments that earn compound interest.

Fluctuations in the stock market

Stocks work differently because their value goes up and down. They are riskier, but they can also offer higher returns. If you have a long time horizon, your investments have more time to recover from market downturns.

Tools for young Canadian investors and savers

Most people benefit from having different types of savings and investments for different purposes. Here are some common options for young Canadians.

Non-registered accounts: HISAs and GICs

Non-registered accounts have no deposit or withdrawal limits. They work like regular savings or checking accounts.

A high interest savings account (HISA) is good for emergency savings because you can access your money at any time. A guaranteed investment certificate (GIC) locks in your money for a set period of time, which can work well for medium-term goals.

These options are low risk because they guarantee your original money plus interest. The disadvantage is a lower return compared to riskier investments.

Registered accounts: RRSPs, TFSAs and FHSAs

Registered accounts offer tax benefits that help Canadians save and invest more effectively.