Good news: Data suggest that young Canadians are more financially engaged than prior generations. For instance, according to data from the British Columbia Securities Commission (BCSC), over the past two decades the share of people aged 18-24 investing in securities has more than doubled.
The bad news, however, is that this rising interest among generation Z in investing isn’t expressed by disciplined long-term strategies such as purchasing low-risk mutual funds to build a healthy retirement portfolio, or other traditional financial advice, but increasingly by way of high-risk trading strategies to try and grow portfolios quickly and aggressively, according to the BCSC.
And this rise of financial engagement isn’t a result of an increase in disposable income. Gen Z doesn’t have any. They’re just surviving, according to several recent surveys. Many younger Canadians believe retirement planning will be more difficult than it was for their parents, according to a recent poll by the Bank of Montreal.
Instead, the increasing prevalence of high-risk investment strategies is a symptom of a worrying rise of “financial nihilism” among young adults.
Financial nihilism, a term attributed to podcaster Demetri Kofinas, is a philosophy that forgoes long-term financial security in favour of near-term consumption and high-risk investments such as meme stocks and cryptocurrencies.
This philosophy can be seen in spending patterns, as younger Canadians, more pessimistic about their economic prospects, increasingly favour splurging on small luxuries such as travel, as opposed to saving for a down payment or retirement. This so called “doom spending” helped fuel the 30 per cent rise in gen Z consumer debt — more than any other age bracket.
In the realm of investing, this means that younger generations are more likely to be involved in speculative crypto investments, “vibes” based investment strategies, and high-risk “YOLO” (you only live once) trades, putting a significant portion of their capital on a single, risky investment in the hope of a substantial return.At the same time, young Canadians are now relying less on professional financial advisors, and increasingly managing their investments themselves, preferring social media and online sources for information and guidance.
And while financial experts might view these investment strategies as short-sighted and irresponsible, for many this behaviour could be viewed as absurdly rational.As wage growth decouples from cost of living, youth unemployment rates skyrocket, and young people give up on ever owning a home, starting a family or retiring by following traditional financial advice, it should come as no surprise that younger Canadians are open to financially risky behaviour.
Housing costs remain far above historical averages. The mortgage payment on a representative home in Canada in the fourth quarter was more than 50 per cent of median household incomes — well above the long-term average of 40.5 per cent, according to National Bank of Canada.
In the choice between forever renting and economic precarity or a high-risk trade that could help with a down payment, treating investments like a roulette table doesn’t seem so ridiculous.
