Canadian Millennials Facing Unprecedented Debt

There have been many suggestions over the past few years that millennials (those born between 1982 and 1991) are lagging behind their parents in income and opportunity. That may not be the entire story. According to Statistics Canada, the Millennial Generation earns higher wages and has greater wealth than the preceding generation. This, however, is accompanied by an accumulation of higher debt, especially mortgage debt.

Statistics Canada has evaluated the economic strength of Canadian millennials aged 25 to 34 versus Gen-Xers (born between 1965 and 1917) at the same age. The result of this cross-generational study revealed that while millennials have greater spending power than their parents did, they are more likely to be less financially secure due to heavy mortgage debts.

In 2016, millennials (25 to 34 years old) had an average annual per-household income of over $66,000. At the same age, Gen-Xers earned $51,000 annually per household. The higher income level may reflect a higher level of post-graduate education. Millennials are “the most educated generation in history.” This means, in addition to high mortgage debts, they also carry unprecedented student loan debts.

The net worth of millennials, excluding their debts, was at $70,600. At the same age, Gen-Xers only had a net worth of $42,800. The real problem with Canadians isn’t poverty, it’s lack of money management skills that can impact the rest of their lives. According to a 2017 report, millennials were more concerned about job security than managing the money earned from these jobs. They also listed relationships as being more important than finances. At this time, they may be working and enjoying relationships, but their future isn’t looking promising. Especially worrisome is the current trend from long-term job security to short-term gig work.

Both Gen-Xers and millennials became homeowners around the same age. Both generations, and the generations before them, value home ownership. But Gen-Xers accumulated smaller mortgage debts, around $83,000. Millennials dive into the housing market with an average mortgage of $218,000. The earlier baby boomers had an average mortgage debt of $67,800, approximately the same as their annual net income.

Millennials may appear wealthier than the preceding generation, but the group also has the widest income inequality, with extremes of poor and rich. For example, the bottom 25 percent of Canadian millennials have a net worth of under $10,000. The top 25 percent show assets in excess of a quarter million. In addition, half of the millennial wealth is in the hands of the top ten percent of millennials earners. This income gap, devoid of a healthy middle class and financial literacy, is greater than with any other generation.

In addition, those with a higher level of education have been in the strongest position to enter the housing market, leaving those with only a high school diploma lagging behind. The location also matters. The cities of Vancouver and Toronto had the highest-net-worth millennials. Toronto topped the scale of millennials with an average net worth of $145,000, while Vancouver millennials are second with a net worth of $91,000.

Yes, Canadians have a serious debt problem. More important, today’s millennials have a serious lack of financial education about how to fix it.

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