It’s never been tougher to establish yourself financially. Today’s young adults face a bewildering unemployment rate (14.7% among Canadians aged 15 to 24) at the same time as they’re fed a steady diet of hyper-consumerism and credit card offers.
Rob Carrick, personal finance columnist at The Globe and Mail, is concerned enough about what lies ahead for his two teenaged sons that he’s written a book: How Not to Move Back in With Your Parents: The Young Person’s Guide to Financial Empowerment. “Retirement is a huge issue, and I wouldn’t say that we spend too much time on it. But we’ve neglected young people,” he told me in an interview last week. “They’ve got serious troubles and we have to address them.”
Carrick’s fans won’t be surprised to hear that the book offers up informed opinion and original thinking. Five highlights from our conversation:
- Too many young (and not-so-young) adults lack a concrete understanding of debt. Carrick hears from a lot of recent university graduates who are surprised by their student loans. “I think the government could do a much better job connecting with young people about their debts before the bill comes due,” he said. “How about an annual statement about how much you owe, and how much you’re on-track to owe by the time you graduate?”
- Young adults need to learn more about how financial services work. “They totally understand online banking and how that can cut your costs,” Carrick said. “But I’d like to reinforce the lesson that the financial services industry is a profit-making venture and that we have to be skeptical. We have to ask questions to make sure we’re getting the best services for the best price.”
- Volatile capital markets have given young investors the wrong idea about risk. They’re risk-averse to a fault. Conventional wisdom dictates that you take on greater risk in early adulthood because you have so many years over which to recover from short-term losses. “Risk goes hand in hand with potential reward,” Carrick said. “Young people can afford to take risk because they’ve got decades of compounding ahead until they retire. And yet they’ve been absorbing this message that the stock market is dangerous.”
- High school grads should take a year or more off before going to university or college. It’s a chance to save money and grow up a bit more. “People who go from Grade 12 right into university can’t always make the right decisions about the best course of study,” said Carrick. “When I went to school, tuition was about $1,000 a year. Now it’s at least $5,000. It’s a massive increase in the cost of education, and also in the cost of making a bad decision.”
- Working for free isn’t necessarily a bad idea. “I think it’s a fact of life in the workforce now,” he said. “The unpaid internship is a growing phenomenon out there. I support doing it if it’s in your field, if you will gain job experience and if you will make contacts that you think you can parlay into a good first career-building job.” Having said that, young people are vulnerable. Carrick’s heard plenty of stories of kids going from internship to internship. That’s not in anyone’s best interest.
I asked Carrick if he sees a new frugality among young people today, given their experiences during these formative years. Won’t they be like those who came of age during the Great Depression? “I don’t really think so,” he said. “In the 1930s they didn’t have mass media that pummels you over the head 24 hours a day about buying things, about the joys of new technology, travel and all that sort of stuff. Our society conditions us to buy from the moment you turn on the television as a little kid. I think it’s tough to swing to frugality when we’ve been conditioned to buy, buy, buy.”
Financial literacy is only part of the solution. “We also need to teach media literacy,” Carrick said. “We need to equip people to be a little bit skeptical about these consumption-oriented messages that they’re being bombarded with.”