TD research finds high cost of education, lower salaries and high debt
load biggest barriers to saving for 20-somethings today compared to 40
TORONTO, June 11, 2013 /CNW/ - According to new research from TD Canada
Trust, more than a third of Gen Y (34%) admit they find it an almost
impossible struggle to save. Young people today face fiscal challenges
that older generations did not have to worry about, like working to pay
off high student debts in tandem with managing spending on lower
Still, the principles of budgeting, saving and spending remain true no
matter the financial reality, according to Raymond Chun, a senior vice
president at TD Canada Trust. Diligence, automation and realistic goals
are essential to making saving money a habit.
The research, which surveyed Boomers and Gen Y on their ability to save
in their 20s, found that today's youth appear to be more affected by
common obstacles to saving than previous generations:
Paying for education costs (44% of Gen Y versus 18% of Boomers)
Salaries too low to cover living expenses (39% of Gen Y versus 30% of
Debts from credit cards, loans and lines of credit (38% of Gen Y versus
26% of Boomers)
The temptation to shop beyond their means (36% of Gen Y versus 16% of
"There is no question that the job market is tighter, university costs
higher and salary growth lower for young people today," said Chun.
"With planning and discipline, young Canadians can lay the foundation
for a solid financial future by diligently tracking their cash flow and
creating a plan for saving and spending."
As a general rule, individuals should aim to set aside three to six
months' worth of essential expenses in an emergency fund. While this is
not easily done for young people starting out today, the most important
thing is to start a savings habit early, regardless of how much can be
set aside at the beginning.
"It is tough for young people to balance all of their financial
obligations as they enter adulthood, but this is precisely why it's
important to be committed to saving even just a little each week -
every dollar counts," said Chun. "Savings provides some freedom if a
great opportunity like a new job overseas comes up, or as a financial
cushion in the event of something like temporary job loss."
Chun outlines principles of budgeting and saving that stand the test of
Small actions yield big results - Reaching a savings goal is a marathon, not a sprint; be diligent about
putting away a little bit with each pay cheque and it will add up.
Consider putting away just $25 a week, and over the course of 12 months
this will add up to $1,300. Don't make the mistake of not saving at all
just because the goal doesn't appear achievable right away.
Budget to help manage spending - Getting ahead is difficult when more is being spent than earned. Assess
spending habits starting with a list of all essential expenses like
food, rent and transportation. Then review each item on the list and
assess whether there are any 'nice to haves' hiding behind them. For
example, food is essential but buying a bagel on the way to work is
not. Whatever is left after the essentials, including servicing debt
and saving for the future, is for discretionary spending.
Save and service debt simultaneously - As a general rule, the amount of debt people carry should not exceed 40%
of their pre-tax monthly income. This means, if a young professional
earns $3,000 a month, monthly mortgage repayments, student loans and
other debts should not amount to more than $1,200. Young people with
heavy debt loads should concentrate on paying down their highest
interest rate debt, such as a credit card, before putting a bigger
focus on saving. If there is no money left over after paying off debt
each month, it's time to review the monthly budget for additional areas
of tightening - or, set up an appointment with a financial advisor to
discuss other options.
Make it a habit - One of the most effective ways to save is to put money away before
there's a chance to spend it. For example, set up a pre-authorized
transfer of a set amount each week to a high interest savings account.
Or, some banks even offer services like the TD Simply Save program,
which automatically transfers a small pre-set amount into customers'
savings account with each access card transaction, like a debit
purchase or an ATM withdrawal.
About the TD Canada Trust Savings Poll
TD Bank Group commissioned Environics Research Group (www.environics.ca) to conduct an online custom survey of 6,014 Canadians age 18 years and
older. It surveyed 1,311 Millennials (born 1981-1999) and 2,186 Boomers
(born 1946-1964). Responses were collected between January 10 and 25,
About TD Canada Trust
TD Canada Trust offers personal and business banking to more than 11.5
million customers. We provide a wide range of products and services
from chequing and savings accounts, to credit cards, mortgages and
business banking, to credit protection and travel medical insurance, as
well as advice on managing everyday finances. TD Canada Trust makes
banking comfortable with award-winning service and convenience through
24/7 mobile, internet, telephone and ATM banking, as well as in over
1,100 branches, with convenient hours to serve customers better. For
more information, please visit: www.tdcanadatrust.com. TD Canada Trust is the Canadian retail bank of TD Bank Group, the
sixth largest bank in North America.
Image with caption: "How to Save for Life's Surprises (CNW Group/TD Bank Group)". Image available at: http://photos.newswire.ca/images/download/20130611_C6759_PHOTO_EN_27814.jpg
SOURCE: TD Bank Group
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