Duncan, 34, and Jenna, 32, live in London, Ontario. They have one child and another on the way. Saddled with high student debt, and facing skyrocketing house prices and stagnant wages, they are involuntary members of what has become known in Canada as “Generation Squeeze.”
Graduate, find jobs, get married, have kids, buy a house, retire. That was the path they had in mind. And why not? It’s what their parents did. However, the mid- and long-term reality for many couples like Duncan and Jenna looks very different from the lives their parents had at their ages.
This is despite both having jobs that in their parents’ day would have been more than enough to enable them to buy a family home and feel optimistic about their financial future. In fact, in the 70s, just one wage earner could bring home the same as two today.
According to recent research, the cost of the average house in Ontario has risen by over $300,000 after inflation since the late 70s and early 80s, while full-time earnings have fallen by $4,600 in the same period. The need to pay back one or two student loans, pay for childcare and other family-related costs, and try to save for a down payment, their children’s future education, and their own retirement is forcing many young families in Ontario to adjust their expectations and recalibrate their finances.
Many can live with being long-term renters if that’s part of their new reality, but rents are rising as fast as housing costs. They’ll work longer if they have to; there’s talk of the retirement age being raised in Canada, so they may have no choice.
Making the choices that matter
In the meantime, what can young families do now to make their dollars go further, take back some control, and plan for the future?
Along with sensible spending and careful budgeting, finding a financial ally you can rely on over the long-term is crucial.
Even after getting married, many young couples don’t pay too much attention to where they put their money. They might set up a joint account, although many don’t straight away. Instead, they often maintain the separate bank accounts they set up at university or before and just split living expenses.
The arrival of a first child often forces a rethink; it sinks in that the big banks are not coming through for them. Banks care more about servicing the needs of their parents’ age group (Baby Boomers) rather than cash-strapped young families.
Not only do big banks favour older, wealthier customers and try to upsell you as many products as possible, but they also charge ever-increasing fees as part of their focus on generating huge profits for them and their shareholders.
When a couple has a baby, everything changes. All of a sudden you need to consider life insurance, savings accounts, a joint account for household finances, and financing a mortgage or other purchase.
Looking further ahead it’s time to take pension planning seriously and start saving for your kids’ education. Retirement planning tends to take a back seat to the needs of the new arrival(s), but it’s still vital to also save for your own future.
Often for the first time in their lives, this is when many young couples take a close look at who they bank with and why. Starting a joint account to cover expenses becomes a priority, along with looking for the financial products they really need, but without the high bank fees.
Increasingly, many young families reject the banks of their parents and go for an option that can better match their values and save them money — a credit union.
Credit unions are not-for-profit and member-owned.
They cater to local communities across the country, with combined assets of over $350 billion and more than 10 million members spread across a network of over 600 credit unions. There are over 70 in Ontario alone. And unlike banks, credit union customers don’t get charged for using another credit union’s ATM.
The ding-free ATM network is just one advantage. Credit unions offer the same services as banks, but instead of focusing on the needs of baby boomers and their own bottom-line, credit unions cater to their local communities and members.
And when you bank with a credit union, your money stays in the community. It’s used to help local businesses and other families, ultimately strengthening the financial health of the community as a whole.