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2023 was a challenging year with high interest rates, inflation and housing costs. Here’s what’s in store for Gen Z as we head into the new year.
Without a doubt, it’s been a rollercoaster ride for Gen Z this year. Young Canadians faced many financial challenges, from housing affordability to rising grocery prices and navigating an unstable job market. Although these issues will spill over into the new year, there are ways to prepare. Here are five things that will likely impact Gen Z in 2024, and what you can do about them.
Depending who you ask, Canada may or may not currently be in a recession. Either way, the reality is that big banks, tech companies and other employers have announced mass layoffs in recent months. It’s been a bumpy year for many young employees.
With so much uncertainty, you should prepare financially for the possibility of losing your job in 2024—even though this is the worst-case scenario. Along with women and racialized employees, young adults are often the most vulnerable to layoffs, as we saw during the COVID-19 pandemic. Being out of the job market for an extended period of time can have a negative impact on your mental health and financial situation, so it’s best to be prepared.
Having a cash cushion can help soften the blow of an unexpected job loss, so consider padding your emergency savings fund to cover your monthly expenses. The standard guideline is to have at least three to six months’ worth of expenses saved up.
Given that many young Canadians are feeling financially squeezed, saving that amount may seem like a tall order. Start with what you can afford, even if it’s $5 or $10 per day. It’s better to start with small, manageable amounts and work your way up to saving a large sum. Before you know it, you’ll see some progress, and that will keep you motivated as you work toward your emergency savings goal.
Rent in urban cities will most likely rise due to several factors. Home owners who are up for mortgage renewals will lock into higher interest rates. Plus, with newcomers flocking to Canada, there will be an increase in demand with not enough supply in the rental market.
In November 2023, the national average asking rent across Canada peaked at $2,174. Landlords have the ability to increase rent on an annual basis. They’ll be more inclined to do this to cover their higher mortgage costs. So, if you’re a renter, you can anticipate to have to dole out more to have a roof over your head.
If you’re feeling the pinch with rent payments, see if you can negotiate your rent with your landlord. One tactic is offering to lock in a specific rate for an extended period of time, say for two years instead of one year. Remember that many provinces have caps on annual rent increases. In 2024, for example, the maximum increase will be 3.5% in British Columbia and 2.5% in Ontario. (Read more about your rights as a tenant).
Don’t forget that some fintech companies allow you to build your credit score while renting and even earn cash back on your rent payments. If you’re not entirely satisfied with where you’re living now, you may want to research other neighbourhoods or move in with a roommate to make these costs more manageable.
Compared to previous years, food prices should stabilize in 2024. However, keeping your kitchen stocked will still keep your grocery bill high. According to Canada’s Food Price Report 2024, overall food prices are expected to increase by 2.5% to 4.5% over the course of next year (whereas food inflation jumped by 4.7% in November 2023). So, if you’re a single adult who spent roughly $375 on food per month this year, you can expect to shell out from $385 to $392 monthly by the end of 2024.
The Food Price Report suggests that you can expect baked goods, vegetables and meats to take a big bite out of your budget. However, you’ll get some relief with canned goods and dried pasta. The good news is that food prices will increase at a more gradual pace than in 2023.
During the pandemic, I started meal planning as a strategy to deal with grocery costs. It’s been helpful in ensuring that our family stays within our food budget and doesn’t fall into the temptation to order takeout. Meal planning consists of deciding what you will eat for the upcoming week and then adding only the ingredients you need to your grocery list.
Personally, I like to make extra lunch portions when preparing dinner, which helps cut back on costs. Another option is to buy items in bulk when they go on sale and then divvy them up into smaller quantities and store them in the freezer. This works well for sliced fruits, vegetables, meats and seafood.
Gen Z will continue to face financial pressure in 2024, so managing debt will become even more important. Between Q3 2022 and Q3 2023, the average credit card balance in Canada increased by 9%, according to TransUnion Canada. The increase was fueled by an increase in the cost of living and the cost of credit, thanks to higher interest rates. Unless the Bank of Canada starts reducing interest rates and daily living expenses start to come down, it’s likely that debt will continue to grow in 2024.
To become financially secure, 40% of Gen Z are interested in generating more sources of income, such as starting a side hustle, according to a BMO survey. Considering there’s only so much you can do to cut expenses, you might want to consider growing your income so you can more easily pay down your debt.
Once you have some disposable income, prioritize paying off high-interest debt, such as credit card debt, which can help to squash your debt load. If you’re carrying a monthly balance, call your credit card provider and ask if they can lower the interest rate. If you’re fresh out of school and borrowed money to pay for your studies, it’s a good idea to focus on repaying your student loans.
Despite rising travel costs, young travellers are eager to escape the daily grind. Many young people would rather spend their hard-earned money on experiences instead of goods. Regardless of being in a tight financial situation, 2024 may be the year many Gen Z make their dream vacations happen.
If you plan to travel next year, look into a travel credit card or loyalty program. There are various factors to consider when picking a card. For example, you may want to choose a card that matches your spending habits, such as one that offers points on dining out, buying groceries or pumping gas. It’ll be easier to accumulate points so that you can redeem them for flights and accommodations. As a bonus, it helps to select a credit card that includes travel insurance, which may cover things like trip interruption, trip cancellation, lost baggage and medical travel insurance.
Remember, try not to get caught up in spending more than you normally would just to collect points. Or else you’ll end up with more debt than you anticipated. As with any credit product, it should help you towards your goals, not hinder you.
Scotiabank Passport™ Visa Infinite Card
SimplyCash Preferred Card from American Express
MBNA True Line Mastercard credit card
No one has a real crystal ball to see into the future. Although these predictions may not be the most optimistic, there’s hope that things will stabilize and improve in the years to come.
If you faced financial setbacks this year, remember that being creative and resourceful will help you not only survive but thrive in 2024. With the right appetite for financial self-improvement, you’ll be able to gain confidence and weather any storm that comes your way.
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Although these are all great ideas, they’re not realistic in today’s world here or elsewhere for most.
Many don’t have enough to cover current basic necessities, let alone put/save $5.00 per day (That’s $150 per month) into anything but staying off the streets.