|By Marketwired .||
|February 7, 2014 06:00 AM EST||
TORONTO, ONTARIO -- (Marketwired) -- 02/07/14 -- According to a report issued today by the BMO Wealth Institute, Gen X (born between 1965 and 1979) and Gen Y (born between 1980 and 2000) exude a sense of confidence about their ability to achieve key financial goals. However, the report, Wealth Generation: The Financial Challenges for Generations X & Y, also notes that this optimism may be misguided given that both groups are facing a unique set of obstacles that could hamper their ability to achieve their financial goals.
The report gauged how Gen X and Gen Y feel about their ability to reach key financial objectives in life, including:
Purchasing a home: Overall, 68 per cent of Gen X and Gen Y feel confident that they will have the ability to purchase a home at some point in their lives, with cohorts in Alberta and Quebec (71 per cent each) and the Atlantic provinces (68 per cent) being the most optimistic, and those in Ontario and the Prairies (67 per cent each) and British Columbia (63 per cent) being the least optimistic. However, an average home in Canada now costs nearly eight times the average pre-tax annual income of a full time job (compared to five times in 1997), meaning that Gen X and Y'ers will need to work harder, longer and save more than previous generations to accomplish the goal of home ownership.
Sending their kids to university/college: Seven in 10 Gen X and Y Canadians who plan to have children expressed confidence in being able to pay for their kids' post-secondary education. However, the reality is that this will be a challenge for many of them given that younger Canadians are choosing to have children at an older age than previous generations. This will result in many Gen X and Y Canadians becoming "parensioners" (retirees/pensioners with limited income and with children who are still young enough to attend a post-secondary institution). This trend, combined with the growing costs of a post-secondary education (it is estimated that the cost of sending a child born in 2013 to university will be as high as $140,000), will likely contribute to financial stress as Gen X and Y endeavour to send their children to universities and colleges.
Living comfortably in retirement: Almost two-thirds of Gen X and Y respondents expressed optimism regarding their ability to save enough to live comfortably in retirement. But this sense of confidence is undermined by the fact that many among both groups have not yet started saving for their retirement. Moreover, there are fewer and fewer jobs that come with employer-sponsored pension plans, and Canadians are living longer than ever these days, thereby necessitating the need to budget for a longer retirement. All these factors are making it an uphill battle for both cohorts, as it relates to having enough money for their golden years.
"While it's encouraging that the majority of Gen X and Y are feeling upbeat about achieving key financial goals, the reality is that there are some obstacles that they need to acknowledge and address if they want to accomplish things like home ownership, ensuring their children obtain a post-secondary education and achieving their ideal retirement lifestyle," said Chris Buttigieg, Senior Manager, Wealth Planning Strategy, BMO Financial Group.
"These generations face challenges that are unique, but there is light at the end of the tunnel," continued Mr. Buttigieg. "If they want to set themselves up for success, it's crucial that they develop a financial plan as early as possible, which identifies key life goals and their associated costs, and then start on a saving and investing program, including opening and contributing regularly to various investment vehicles such as TFSAs, RRSPs and RESPs. This will help ensure that they are setting themselves up for long-term financial security and significantly improve their ability to achieve their financial goals."
To view a copy of the full report, please visit: www.bmo.com/wealthinstitute.
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About the BMO Wealth Institute
The BMO Wealth Institute provides insights and strategies around wealth planning and financial decisions. The Institute's team of professionals have deep expertise around all aspects of wealth planning including retirement, estate, tax and insurance.
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified North American financial services organization. With total assets of $537 billion as at October 31, 2013, and more than 45,000 employees, BMO Financial Group provides a broad range of personal and commercial banking, wealth management and investment banking products and solutions.