Canadians must take financial responsibility earlier
Longer life spans, career interruptions mean Gen-Xers need bigger next eggs

By all appearances Stefan Pommepuy has got it made. He is only 24, in great shape, holds two jobs, has traveled around the world and shares a stunning penthouse apartment with three friends.

But despite his youth, -- a time generally associated with impulse purchases and instant gratification --Pommepuy takes a strong interest in his personal finances, and has been investing in an RSP for several years.

"Although I make good money, it comes in peaks and valleys," said Pommepuy. "So I have to be careful not too spend too much in the good times and not to panic when business is slow."

Pommepuy is typical of many young Canadians, who are more concerned with financial matters than those in previous generations were at the same age. One landmark 1998 Royal Bank of Canada survey says it all: among the big ticket items that Canadians between the ages of 18 and 30 were planning to buy in the upcoming year, RRSPs ranked first, ahead of home entertainment, cars, computers or even vacations.

According to Kevin Cork, a financial planner, and author of The Money Book: A Survival Guide to Canadians under 35, today's youngsters have some daunting challenges ahead of them.

"Younger Canadians will be big beneficiaries of scientific and medical breakthroughs which will increase their life expectancies," Cork said. "But that means they will also have a much longer retirement period. Someone planning to stop working at 55, could be drawing a pension for between 35 and 40 years."

According to Cork, jobs today are also much less secure than in the past. That means fewer people will be retiring with solid company pensions. Those now entering the workforce also realize that they can expect extended periods of time during their careers when they will be between jobs and thus have no revenue. So they need to build up a nest egg to carry them through those periods.

"Canadians between the ages of 25 and 35 realize more than ever that they have to take responsibility for their own finances," Cork said. "They don't have the luxury of becoming hippies for twenty years."

"When I started in this business ten years ago, I had to drag young people kicking and screaming into my office. Today, the financial planner is often the first person they go to see after they have finished college and started working."

Pommepuy's experience is typical of the unsteady earnings that younger Canadians are getting accustomed with. Pommepuy works as a sales representative in his family's medical products distributorship Force 3 Médicale Inc. However although his job is highly specialized and the compensation is attractive, a good portion of it is commission based.

But unlike many of his contemporaries, Pommepuy has a great revenue source to supplement his income. He works between four and five days a month as a male model for the Sybille Sasse agency. Although he is by no means an international star, Pommepuy is well-known in Montreal fashion circles, and commands an impressive $135 an hour.

"The pay is good, and it adds up fast," said Pommepuy who keeps in top shape for photo shoots by biking and working out in his extensive home gym. "Although I work long-hours in my day job, I have a lot of flexibility to accommodate my modeling assignments."

Like many Canadians his age, Pommepuy is not counting on government pension plans to fund his retirement. "To be honest with you, I never gave them a moment's thought," Pommepuy said.

According to Cork, persistent doubts about the Canada and Quebec Pension Plans are one of the main motivating factors behind younger Canadians' increased interest in financial matters.

Younger Canadians are severely disadvantaged by both the CPP and QPP. Both plans operate similar to a pyramid scheme, with each generation paying for the previous generation's pensions.

And since neither the World War Two generation nor the baby-boomers paid enough into Canada's pension plans to finance their own retirements, subsequent generations will be footing most of the bill.

In the last nine years - just as younger Canadians entered into the workforce --CPP and QPP contributions have close to trebled -from to a combined employer/ employee rate of 3.6 per cent of salaries in 1994 -- to 9.9 per cent in 2003.

The combined effect of these rate increases will be an intergenerational wealth transfer, totaling tens of billions of dollars from relatively-poorer younger Canadians to today's seniors and the retiring boomers, who already control most of the country's wealth.

According to one pollster one reason that politicians so favor older Canadians with their policies is that younger Canadians don't participate in the political process. "Young people are more and more alienated from decision centers," said Christian Boucher, of Ekos Research Associates. According to Boucher those less than 25 years old are less than half as likely to vote regularly in federal elections as those over 65.

Ironically one of the most profitable financial strategies that younger Canadians could employ might be to just get out and vote.


Photo caption: Stefan Pommepuy is typical of many younger Canadians who are taking responsibility for their finances much earlier than their parents did

Diekmeyer can be reached at


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