The new financial roadmap for Gen Z and young Canadians

Education is expensive, homeownership is delayed, careers have evolved. There’s a new set of milestones for financial adulthood, and timelines have changed. The first goal for young people starts when they land a job, according to Chris Merrick, principal at Merrick Financial and a fee-only financial planner in Toronto.

As soon as you get a paycheque, you need to draft a budget. “Budgeting is more of a tool than a chore,” Merrick said. “The new normal is that a budget is less of a sign of financial struggle, it is more like financial literacy, because cost of living, housing is higher. Just winging it is much harder.”

Budgeting means lifestyle trade-offs early on

You can use an app or just draft up an Excel spreadsheet, he said. Your method doesn’t matter as much as what the budget represents—restrained spending. For that reason, Merrick said this first milestone is likely the hardest.

“If you are earning and spending, and still saving a chunk, [a budget is] less important, but that’s not the vast majority of people,” Merrick said. “It’s not buying those concert tickets, not doing that trip, not going out for dinner twice a week, not going for a few drinks. A budget essentially means lifestyle constraints. That’s often the hardest one, especially when you’re young, when you want to have a good time.”

Emergency fund comes before competing goals

The next milestone should start immediately after the budget, and should land in your early to mid-20s: an emergency fund.

“Instead of saving for a house or a wedding, you need a three-to-six month emergency fund,” Merrick said. “Even before paying back all of your debt, just because [an emergency fund] makes you feel good too. It’s psychological.”

After these first two goals, the typical ones that follow—paying down student debt, saving for a wedding or home, investing, saving for retirement—should not necessarily be linear, said Tony Capotosto, vice-president of Canadian banking at Scotiabank. “It’s not like it was in the past where they would focus on one goal,” Capotosto said. “Now, a lot of Canadians have multiple goals, and it’s having that balance. What I would say is: focus on consistency over perfection.”

Generation Z seeking financial advice more than millennials

One potential early milestone before tackling your 30s could include getting professional advice and developing a multi-goal financial plan. Capotosto said that gen Z is already ahead of earlier generations—a Scotiabank poll from February showed 47% of gen Z sought advice from a financial advisor, compared with millennials at 38%.

“Understanding your financial picture earlier on, and not just focusing on one goal in isolation—and how that fits into managing your debt, your savings, your investing, and also your day-to-day spending—is important,” Capotosto said. “It can help you be more confident about your decisions as your priorities shift over time.”

Merrick said figuring out a budget and saving an emergency fund can be done solo with some research online, but agreed that the next few goals would benefit from advice. Becoming debt-free as soon as possible is a big win, he said, but you can pursue two wins at once. 

Merrick favours paying down student loans at the same time as early investing, depending on interest rates on the debt, among other factors. “In terms of the more difficult things—which accounts to put the money to invest in—that’s a little bit more complicated,” Merrick said. “You don’t have to be rich to talk to a financial planner.”

Financial habits matter more than milestones

It’s more normal now for student debt to last deep into your 30s, Merrick noted, and for some, homeownership might land in your 40s. Purchasing a home is a major milestone for many Canadians, but it’s not necessarily a mandatory one. “Rent and invest the difference” is still a viable alternative to build net worth over a lifetime, Merrick said, noting how common that strategy is in the rest of the world. “That’s how they fund retirement. Here, everyone’s real estate obsessed. Buying a house is kind of a measure of success in society.”

More broadly, Merrick believes the biggest shift for young Canadians will be to reduce their focus on assets, and instead measure their financial well-being on their habits. Do they have a plan, are they contributing to multiple priorities, are they following the budget? “You’ve got a system, right? You’ve got an emergency fund. You contribute a set amount each month, you put it into the right accounts, you’re building toward these things,” Merrick said, “as opposed to just buying a house at a certain age.”

Having a plan and following it is the ultimate aim, with the individual goals mattering less, Capotosto said. The same Scotiabank poll found that more than half of gen Z Canadians financially struggle to balance wants with needs. “Compared to other generations, it’s more about finding consistent behaviours,” Capotosto said.

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