By Dian Cohen
I was horrified the other day when I read that cryptocurrencies are finding their way into RRSPs and other retirement savings plans. My ideas about saving and dealing with money come straight out of antiquity – I’m the child of people making their way during the Great Depression of the 1930s. Oatmeal for breakfast and saving money were staples. The things I know about cryptocurrency – that it’s digital, unregulated and volatile – is enough for me to say it doesn’t belong in an RRSP.
I wonder if any of my advice about money management is valid for people younger than me. After all, 80 years lie between the Boomers and Gen Alpha – the circumstances of our lives have been very different, and so are our attitudes about money. Advice is like a tree falling in the woods – if nobody hears it, does it make a noise?
I’m pretty sure it’s been okay for Boomers – age 58-76. Post-war optimism and a rapidly growing economy shaped them and, although I’m older, I benefitted from that rapid economic growth too. Unhappily, boomers are growing increasingly concerned about affording their retirement years – on average, they’d like to have another couple of hundred thousand saved. More than half say they’ll downsize and 40% say they’ll work continue to work to supplement their retirement income. They know what they’re doing and don’t need much advice.
Gen X – age 42-57 – a “latchkey” generation as both their parents went out to work, and now a “sandwich” generation, raising a family and taking care of parents. Gen X is worried about their financial future — retirement, saving, and understanding digital currency are among their top concerns. A little over half expect to be able to retire, but one in four aren’t sure. Paying down the mortgage is straining their finances. Advice is a two-edged sword – necessary but hard to take. The saving grace of Gen X is that they will inherit billions.
Gen Y – Millennials – age 26-41 – shaped by 9/11 and the huge impact of the internet and social media. This highly educated group graduated with higher levels of debt than previous generations and came into one of the hardest job markets during the Great Recession of the 1980s. Many Millennials have turned to part-time and contract work, as well as the gig economy. Their income streams can be erratic; low interest rates since the Great Recession makes them question not just the value of saving but the trustworthiness of financial institutions. Millennials feel overly judged by older generations for their financial habits. They too inherit multi-millions.
Gen Z – age 11-25 — the children of financially-deprived parents – they are more aware of the benefits of little debt and more financial literacy. They think even less of financial institutions and don’t relate to their grandparents ways of thinking about money management.
Gen Alpha – age 0-9+ — the pandemic and the economic distortions it is causing are shaping their lives, along with the attitudes of their Millennial parents. Technology is built into their lives and many of them attended school virtually. They’re used to seeing the world on a screen. They may spend money through apps and not be much related to cash.
The massively different economic and financial times that each generation has grown up in has informed their financial attitudes and opinions. The COVID-19 pandemic has become the great equalizer, as all generations have had to adapt to a new way of living and thinking about money. My conclusion: basic financial advice remains the same – but it has to be focused on very different goals and delivered in very different ways if it’s going to be heard.
Dian Cohen, C.M., O.M., economist
If a tree falls in the woods
By Dian Cohen