Generational Debt: How to Stop Giving and Start SavingNov 07, 2018
For baby boomers and seniors, generational debt is a major issue. And that debt isn’t always their own.
Our recent Affordability Index survey reveals that three-in-10 Canadians 55-and-older view helping their adult children as one of their top three financial challenges.
Whether their retirement is approaching or it’s already a reality, Canadians in this 55+ age group have less time (and often less available income) to pay debt back or add to their retirement savings. But it’s hard to turn your back on your adult children and grandchildren, especially when you genuinely want to help.
Having savings is critical for a relaxed and comfortable retirement. As a boomer or senior, you’ve been working towards retirement for a long time and you deserve to reach it. Alarmingly, our Index results show that the path to a secure retirement isn’t always easy.
Here’s what boomers and seniors told us:
- 45 per cent see retiring at age 65 as a need versus a want.
- 60 per cent find saving for retirement to be very challenging.
- 75 per cent see saving for retirement as necessary, but they’re having a hard time doing so, and it’s not just due to a lack of money.
- A full 55 per cent of all Canadians making $100,000 or more a year still find it difficult to save for retirement.
If you can’t achieve your retirement goals, one solution might be to look at cutting back on the amount you’re giving to others. Prioritize your own savings and debt repayment goals instead. Especially your non-mortgage debt.
How to take a step back from giving
Alberta is still recovering from the recession and some adult children genuinely need financial help. When that’s the case, it’s important to only give what you can afford so you can keep your own finances on track.
There are many other ways to help adult children who are struggling financially. For example, you can direct them to resources that can address their particular needs. Or give them your time by watching grandchildren so they can take on an extra job.
If it’s hard to say no to your grandchildren, consider explaining to them that you’re happy to help with things they need but can’t afford to help with wants at the moment. Here are a few online resources that can help:
- This article from SixDollarFamily talks about discussing the difference between wants and needs with kids.
- November is Financial Literacy Month, a great opportunity to talk to your kids and grandkids about some basic financial topics.
- Grandparents, you might also want to read this article on how to avoid your own back-to-school debt.
How to make saving a priority
Online resources like Practical Money Skills Canada can provide you with calculators, tools and financial advice to help you determine how much you can afford to save and help you set up a regular savings plan.
Cutting back on spending can free up funds to go into your savings account. Many people are discovering the rewards of adopting a minimalist lifestyle, including less clutter, less stress and a bigger savings account.
If personal debt is one of the things keeping you from being able to retire, look at ways to reduce it. Depending on your circumstances, debt consolidation could be an option. You can also use strategies like the debt snowball and the debt avalanche to help you eliminate that debt.
Baby boomers who want to retire deserve to do so, without a heavy load of generational debt. Cutting back on the amount you give to others and increasing the amount you give to yourself is a key tactic to help you achieve your goals.