Parents worry about Gen Z financial futures as costs outpace incomes

TORONTO · Most Canadians believe parents need to be worried about their children's financial futures, a new survey shows. The BMO survey of about 2,500 adults found 88 percent of respondents hold that view. It also showed 82 percent said parents need to continue supporting their children into adulthood, with nearly a third saying that support should last as long as the parent lives. The findings highlight widespread financial anxiety for Generation Z, Canadians aged 14 to 29, whose incomes have not kept pace with inflation in recent years.

Financial planner Anita Bruinsma said her experience with clients reflects these survey sentiments. "When putting together a financial plan, many people want to incorporate supporting their adult kids," Bruinsma said. This support can come as a lump sum for a down payment, help with day-to-day expenses, or paying for weddings and family vacations. Bruinsma is a Toronto-based certified financial planner and a parent of two teenage boys.

The cost of living presents one of the biggest barriers to financial goals for Gen Z. A hypothetical budget for a single person in Toronto illustrates the squeeze. According to a 2024 Council of Ontario Universities survey of about 30,500 graduates, the average annual salary two years after graduation is about $64,000. After tax and deductions, that leaves about $4,200 a month in take-home pay. With average rent for a one-bedroom apartment in Toronto at $2,300, plus groceries, utilities, transit and personal care, a person would have about $1,100 left monthly. Adding costs for dining out, a gym membership, entertainment and clothing would use another $610, leaving only about $500 a month, or $6,000 a year, for savings or other expenses. Having a roommate can provide significant relief, cutting housing costs by about $850 a month and allowing for roughly $16,000 a year for additional expenses and savings.

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Beyond monthly budgets, parents worry about general financial security for unexpected costs. "Life happens: phones need replacing, apartments need furnishing, friends need wedding gifts," Bruinsma noted. She said planning for these added costs is key to avoiding credit card debt. Her advice for Gen Z is to create financial security from the start by building an emergency fund of a couple thousand dollars to cover unexpected costs.

Bruinsma also emphasized the importance of starting long-term savings with a first full-time job. "The benefit of investing early cannot be exaggerated," she said. The power of compounding over time makes it easier to save for retirement and builds a foundation for financial stability. She acknowledged that not all Gen Z situations are the same, with some in lower-paying jobs, the gig economy, or dealing with student loans.

Buying a home is also much harder for this generation than for prior ones. Despite the challenges, Bruinsma said financial security is not impossible. "Giving them good financial advice and the confidence to make their way will help," she said. The financial pressures extend beyond young adults, as many parents also rely on family for financial help with soaring costs.

With files from The Globe and Mail