The pandemic is inspiring Gen Z to build financial resilience

November 10, 2021

From: Canadian Bankers Association

The coronavirus pandemic has tested the limits of Canadians over the past 20 months. What began as a health crisis quickly morphed into an economic crisis, with the spread of COVID-19 shocking large segments of the economy and leaving many without paycheques.

While no generation has been unaffected by this disruptive event, the financial impact was distributed unevenly. This economic downturn and recovery from the pandemic are different from previous recessions because its effects were, and continue to be, felt more acutely by specific portions of the population. As a result, what emerged is what economists generally refer to as a “K-shaped recovery” where Canadians across income groups are recovering at different speeds and may face different long-haul financial consequences.

Generation Z, or Gen Z, was dealt a disproportionately tough hand during the pandemic. Many younger Canadians have had their education disrupted, career plans changed, and financial prospects diminished, largely because they are overrepresented in the highly affected service sector. As of April 2021, Gen Z accounted for roughly half the country’s drop in employment since the onset of the pandemic, and more than 130,000 young people had dropped out of the labour force entirely, most of them women. The gradual reopening of in-person services has helped bring back some of those jobs, but the economic scars on Gen Z might be visible for some time.

A recent survey of Gen Z (youth aged 18-25) by the Canadian Bankers Association (CBA), published this November to mark Financial Literacy Month, found that:

More than half of respondents felt the pandemic upset their financial security.

A similar proportion say that they would have suffered greatly without government income supports. In both instances, these numbers rise to about three-quarters for respondents in less stable financial situations. Moreover, about two-thirds of Gen Zers surveyed received COVID-related government benefits; again, that increases to roughly three-quarters among those who are more economically disadvantaged.

Despite the setbacks, Gen Z has shown incredible resilience in channeling its natural gifts for perseverance, adaptability, and motivation.

The same survey found that younger Canadians are eager to forge ahead, be prepared for the unexpected and build bright futures as our economy recovers. In fact, nine in ten Gen Zers are feeling optimistic about their financial futures, and nearly all of them are actively making plans to strengthen their financial resilience.

Gen Z is keen to save.

Three-quarters of those surveyed have a savings account and say that they put at least one per cent of their income aside as savings, with an overall average of nine per cent of income saved. While respondents in higher self-reported income groups are more likely to be savers, and save more on average, the majority of those in less secure financial situations also have a savings mindset. When asked what they are saving for, the overall top responses are: an emergency fund and financial independence. Both goals are likely top of mind against the backdrop of the sudden and unexpected economic shock brought on by the pandemic.

Gen Zers are taking active steps to track their expenses and control their spending.

Overall, more than 70 per cent say they are actively budgeting, with more than half saying they do so in a formal manner. While they may be avid budgeters, more than nine in ten survey respondents say they experience barriers with sticking to a budget. The most common barrier is not earning enough money, followed by unexpected expenses and impulse shopping.

Consistent with their savings mindset and penchant for budgeting, more than half of Gen Zers who received government income supports saved at least some of this money. And in response to a separate question, roughly the same number say they used government benefits to help lower their debt.

Banks in Canada were instrumental in standing up emergency government programs during the pandemic, while also offering their own tailored relief solutions for affected customers and working closely with them to help bridge them to recovery.

Most Gen Zers have sought advice regarding financial planning or debt management.

The most cited sources are friends and family, followed by financial institutions. The survey revealed that a large majority of Gen Zers trust their bank and feel that it is meeting their needs. This shows that there is opportunity for banks to further engage with younger Canadians to help them chart a path to financial resilience amid the ongoing pandemic.

All Canadians are encouraged to talk to their banks early in the process of managing their financial lives and frequently as they go through different stages of life. Working together with their customers, banks can help set and maintain good financial habits that will help them get and stay ahead financially. The coronavirus pandemic revealed that, with proper planning and advice, even the economic shock of a global crisis can’t derail long-term financial goals.

Get the full results of the CBA’s Gen Z survey.

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