“Millennials get punished,” says O’Connor.
“A credit report is largely dependent on things like your mortgage or car loans. Well, we tend to rent longer. We may not own cars”
taking on a mortgage if it means years of sacrifice. “My parents bought a house that was too big and expensive, and they spent most of their lives scraping by as a result,” Brown notes. “I don’t want to get myself into a situation like that.” Adds Beyer, “I don’t want to spend my whole life paying off a house I can’t afford.” If the banks don’t seem concerned about this attitudinal
shiſt in home ownership, it may be because they haven’t felt its effects yet. Indeed, for every Canadian millennial who eschews a mortgage, there’s another who’s already got one. In contrast to the US, where just 36% of millennials own a home, a recent TD Economics report found that more than 50% of Canadian millennials own a home — a higher percentage than previous generations at similar ages. It’s possible Canadian millennials are receiving more paren-
tal help than their US counterparts, as the TD report points out: “Parents of millennials in Canada have benefited from a near- doubling in the average home price over the last decade. No doubt, some of this wealth and resulting financial wiggle room has been passed down to children.” Recent news reports have highlighted another way boomer parents are helping their cash-strapped kids: by cashing out their RRSPs or other invest- ments. That could be yet another costly trend, at least as far as the financial institutions that manage those investments are concerned. Even among millennials who are fortunate enough to have
family help and are on decent financial footing, obtaining a mortgage can be a reality check. Take Sean O’Connor. At first, it was difficult for the 26-year-old to accept that he and his wife, Stephanie, 27, couldn’t afford a house in Vancouver where he grew up. He had no student debt (his parents paid for his post- secondary education — a bachelor of commerce from Montreal’s McGill University) and he had little trouble finding work after graduating. Still, the couple had to drain most of their investments and get money from their parents to put together a traditional 25% down payment on a townhouse in South Surrey, BC, about an hour outside of Vancouver. “We bought at the lower end of our affordable mortgage as we knew that there were still a lot of uncertainties,” O’Connor says. Those uncertainties include the cost of raising their two young kids, aged three and 11 months, on one income.
42 | CPA MAGAZINE | MARCH 2016
Stephanie stays at home with the kids and plans to do so until they’re in school; O’Connor recently satisfied his “entrepre- neurial itch” by leaving an executive position at a construction company to join Grow, a financial technology startup. Although he’s a vice-president of partnerships, he took a 50% pay cut from his last position in exchange for an equity stake in the new company. O’Connor had the foresight to obtain his mortgage while he
was still working for the construction company. He knows it would have been much more difficult to qualify for the same size mortgage in his current job, because the banks don’t look kindly on ambiguous forms of income, such as equity, commis- sion or contracts. He believes the natural entrepreneurial incli- nations of millennials sometimes work against them when dealing with financial institutions. “Millennials get punished as contracted employees. The
cash flow is still relatively the same, but the data used as outputs to show our financial health doesn’t make it into the traditional metrics,” he says. “A credit report is largely depen- dent on things like your mortgage or car loans. Well, we tend to rent longer. We may not own cars. We have made Uber one of the fastest-growing companies in the world.” As more millennials move toward entrepreneurship — up to
two-thirds have the goal of starting their own business, accord- ing to at least one US study — banks may need to change their overall risk policies, concurs Wallis. “They need to figure out how to use data other than a pay stub from a corporate employer to supplement what they know about the customer to support their risk policy,” she says.
Investment innovations The stereotype is that most millennials don’t have investments or, if they do, they don’t amount to much and are in low-risk products such as GICs, in an attempt to avoid drastic market losses like those of the 2008 financial crisis. But a CIBC study released last December found that two-thirds of millennials do have investments — everything from mutual funds to stocks, bonds and GICs. What they don’t have is adequate financial know-how. According to the study, 82% of millennials who own invest- ments say they don’t have enough knowledge to manage them.
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72