What We Took Away From The Smart Money With Rob Carrick And Shannon Lee Simmons Discussion
Last week, David MacDonald and I attended The Globe and Mail subscriber event Smart Money with Rob Carrick, featuring author Shannon Lee Simmons. Shannon focused the conversation on Millennials, and the anxiety that is often associated with financial planning; her funny, down-to-earth demeanour made a typically dry topic very entertaining. She shared her experience both as a Millennial and as a financial adviser – offering practical advice for Millennials needing some guidance.
Without the ability to purchase a home in cities like Toronto and Vancouver, Millennials are left feeling inadequate
Here are a few take-aways from the discussion:
Millennials (and, in general, all Canadians) are asking, “Am I financially OK?” – as there is a deep sense of anxiety about their financial future, partially driven by skyrocketing home prices. Without the ability to purchase a home in cities like Toronto and Vancouver, Millennials are left feeling inadequate. Millennials are contemplating renting as a longer-term option, and Shannon supports this choice if it fits the individual’s personality. She believes that renting in a hot real estate market like Toronto or Vancouver could be a very wise option IF one is able to save for the future on top of just paying rent.
Keeping up with the Joneses (with help)
While parental gift contributions in home purchases are prevalent – sometimes worth hundreds of thousands of dollars – the gift is often not discussed between peers. The taboo or unspoken nature of these gifts increases Millennials’ anxiety as they see their peers buying houses that they would otherwise be unable to purchase on their own. The receiver feels ashamed about needing the financial gift, and thus remains silent; their peers’ feelings of pressure to keep up are further exacerbated, and they feel even more inadequate financially.
In addition to parental gifts, social media increases Millennials’ anxiety about their financial well-being. Facebook and Instagram posts share only the edited versions of people’s lives, curated with a positive spin; and while many see the glamourous vacation or fancy dinner, they don’t see the underlying issues or compromises that were made.
Shannon noted that the rule of thumb of three to six months’ salary as an emergency fund may be off-putting for Millennials, and may actually discourage them from setting up such a fund. Instead of aiming for three to six months’ salary, Shannon suggests using three months’ fixed costs as a base, including costs of rent, basic groceries, phone bill, etc., which a Millennial will need in case of a layoff or emergency.
After emergency funds, debt repayment is the most important, compared to investing in stocks or bonds. Since debt interest rate is a guaranteed rate, it’s unlikely that an investor would be able to find a guaranteed rate that is higher than that of the debt. As such, rather than hoping for a higher rate in the markets, she’d prioritize debt repayment.
Next three to five years
Rob pointed out that we’ll likely see a cyclical financial downturn in the next three to five years, but he predicts that it won’t be a large drop like the one we experienced during the 2008 financial crisis.
Overall, it was a fun discussion to accompany Shannon’s book Worry-Free Money: The Guilt-Free Approach to Managing Your Money and Your Life – and beneficial for Millennials to learn the basics of personal finance!
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