Here are the 3 most common reasons we can’t stop stressing about money, according to an expert
While key findings in the Canadian Financial Capability Survey estimate that 69% of Canadians say finances keep them up at night, there’s a path forward to helping you alleviate that stress.
It can seem daunting, but getting a financial advisor is a big first step you can take toward getting control of your finances. A good financial advisor will make you more informed, and a great one will personalize that advice to your unique situation. Either way, a financial advisor will help you meet your financial needs better than any TikTok financial influencer or one-off article you read on Twitter ever could.
To help young Canadians feel less worried about their finances and tackle the most common stressors they face, we spoke with Certified Financial Planner at Coast Capital Colleen Ciccozzi. She broke down what factors led to this current economic downturn, and how financial advisors can help young Canadians make better strides toward a more stable financial future.
It’s not just you, it’s the economy
One of the main stress points Ciccozzi notes facing young Canadians is their ability to save money for their potential goals. With record-high price increases across multiple industries, over-inflated housing prices, and high rental prices, they’re spending more of their money on their everyday purchases, which provides less opportunity for them to save towards future goals.
Most of these problems have come from the low-interest rates that started becoming more the norm to compensate for the 2008 recession, cites Ciccozzi.
This kind of economic environment has made it so that Canadians aren’t seeing the same returns on their savings, which means they have to put in more to make up for a lower rate of return when they put their money in savings accounts or Guaranteed Investment Certificates (GICs).
“There is a distinct lack of trust by younger Canadians toward investing in the stock market,” Ciccozzi tells Daily Hive. While this mistrust comes from a real place, there are options like market-linked GICs that can benefit young Canadians when the market is up, while also guaranteeing their principal investment back.
Increases in the cost of living
The 2008 recession is also what Ciccozzi points to, among other factors, when discussing the rising cost of living.
“Canada, along with other developed nations, is coming out of an artificially prolonged low-interest rate environment,” she says. “Attempts were made to increase rates before 2020, but then the pandemic abruptly erased the upward trend and we ended up with another two years of lower interest rates.”
The combination of the lower interest rates with economic stimulus from the federal government, supply-chain issues, and spending less on non-essential items during the pandemic developed a “perfect storm,” according to Ciccozzi.
With more cash in people’s pockets, it caused a pent-up demand for goods and services while fewer of those goods and services were on the market. That means businesses had to charge more for the same items to make up for the decrease in spending.
Ciccozzi also cites the gap between cost-of-living wage increases against the reality of how much it’s increasing.
“If groceries are 13% more expensive than last year, but your wage only rose by 3%, then you’re forced to either spend more for the same amount or choose to purchase fewer groceries. Both scenarios demonstrate that your purchasing power has declined by a significant margin. Your wage rose, but you can purchase less with it.”
Young Canadians are finding alternatives to traditional savings
Because of the shifting economic situation, young Canadians have had a rougher time reaching key financial goals than in previous decades. Whether it’s making a big purchase like a home or a car, paying off student loan debt, or saving for retirement, this generation has had more roadblocks when it comes to saving money within the same time frame as the previous generation.
This change has meant that financial advisors have a different role to play in Canadian’s lives than they did previously, says Ciccozzi.
“Financial advising, as a profession, was established back when Canadians could purchase GICs and other lower-risk investments and get a return in the high single digits — and for a while in the double digits,” she says. “This was also an era where four to five out of 10 workers benefited from employer-sponsored retirement pensions. For many Canadians the financial advising conversation was quite simple, identify the goal and save towards it.”
As interest rates have declined, many Canadians have had to take more risks by shifting their savings into market-based investments with the hopes of yielding higher returns. This means the role of a financial advisor has changed into someone who not only helps manage financial goals but also the emotions that come up in volatile markets.
“When the discussion turns to saving more, we have to help Canadians figure out how they can do this in the face of rising inflation. This can be challenging for members so it is our job to design the best plan we can with the resources available. Today’s financial planning is more about collaborative creativity and less about the hot investment.”
How a financial advisor can help you save
A common misconception about traditional banks and financial advisors is that they’re only there to try and sell you products, but that’s not true. A good financial advisor can help you make more informed decisions about your finances, and alleviate the mistrust young Canadians have felt with financial institutions.
“Canadian banks and credit unions are there to help young Canadians get started both with lending and investing,” says Ciccozzi. “Financial advisors are very aware of the types of life events that may prompt you to seek advice and we also have the education to guide our members.”
Their advice can be more practical, like finding ways to help you build your credit history or setting you up with a personal financial management tool, like Coast Capital’s free, personal financial management tool, Money Manager. But often, the advice from financial planners will be more holistic, working with you to build a personalized plan that helps you figure out where you want to go financially.
At Coast Capital, they have over 260 licensed and accredited financial advisors and planners who can work with young Canadians to get them on track to achieve their financial goals, no matter what stage their finances are in when they start.
Potential members can schedule a one-on-one session over the phone or in person with a financial planner at any Coast Capital branch. It also has a free Money Chat tool for those who aren’t quite set on taking that first step and still need more clarifications on how Coast Capital can help them.
While the economic situation right now isn’t ideal, there are always steps you can take to move toward better financial security. “My experience is that financial advisors always want to work with members to help them achieve their financial goals,” says Ciccozzi.
Get started on your financial journey
While it may seem overwhelming at first, Ciccozzi tells us there are plenty of ways financial advisors can help you push through the financial doubt and save in ways you never thought possible.
Before meeting with an advisor, doing research will help you be more informed going into your first few meetings, and set you up on the right path. Coast Capital’s Help Hub is a great place to source information, as it’ll give you some general knowledge related to the Canadian financial market, and hundreds of articles that outline the fundamentals of smart money management and offer advice on how to start applying them to your finances.
During your first meeting, it’s also important to be honest about what you want to achieve and what resources you have available to you. No matter what your income is, what your debt levels are, or what financial goals you may want to achieve, the more honest and collaborative you are with your financial advisor, the better the outcome.
While it may seem daunting to leave finances in the hands of someone else, the people that work at co-operatives like credit unions offer informed financial advice to help their members, rather than sell them on products. They’re also doing so because they’re dedicated to helping people achieve their goals — not because they want to sell you anything.
“I’ve been doing this for almost 30 years, and I am as excited today when I see a member purchase their dream home or realize they can retire earlier than they thought as I was the first time I had that experience, and I know my peers feel the same.”
For more information on how you can better prepare your finances, or take the next step in searching for a financial advisor, visit Coast Capital’s website. New members are eligible to receive up to $500 — conditions apply.
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