Gen Y struggles to save

The study finds today’s youth are more affected by common obstacles when it comes to saving compared to previous generations, including:

• Paying for education costs (44% of Gen Y vs. 18% of Boomers)
• Salaries too low to cover living expenses (39% of Gen Y vs. 30% of Boomers)
• Debts from credit cards, loans and lines of credit (38% of Gen Y vs. 26% of Boomers)
• The temptation to shop beyond their means (36% of Gen Y vs. 16% of Boomers)

“There is no question that the job market is tighter, university costs higher and salary growth lower for young people today,” says Raymond Chun, a senior vice president at TD Canada Trust.

Read: How to entice Gen Y prospects

This is why Gen Y should track cash flow and create a plan for saving and spending, he says. Individuals should set aside three to six months’ worth of essential expenses in an emergency fund.

Read: 4 ways to help Gen Y plan for retirement

Here are some additional tips.

1. Be diligent. Consider putting away just $25 a week, and over the course of 12 months this will add up to $1,300.
2. Budget. Assess spending habits starting with a list of all essential expenses like food, rent and transportation. Then review the list to see where you’re spending excessively. For example, food is essential but buying a bagel on the way to work is not. Whatever is left after the essentials, including servicing debt and saving for the future, is for discretionary spending.
3. Service debt. The amount of debt people carry should not exceed 40% of their pre-tax monthly income. So if a young professional earns $3,000 a month, monthly mortgage repayments, student loans and other debts should not amount to more than $1,200. Young people with heavy debt loads should concentrate on paying down their highest interest rate debt, such as a credit card, before saving.
4. Make it a habit. Put money away before there’s a chance to spend it. Set up a pre-authorized transfer to a high interest savings account.