Financial wellbeing is often measured by salary, quality material goods, and awesome experiences.
By these measures, it looks like everyone is a millionaire.
But the reality is that the average financial state is bleak for millennials in the US and Canada.
My aim in this post is to paint a picture of reality for millennials in North America.
This picture is a sad reminder that traditional measures of wealth are often a facade.
I find these personal finance statistics to be useful in suppressing my (very natural) urge to compare my financial life to others. Hopefully, the data helps you do the same.
I also share stats on debt, income, and investing that you may find interesting and helpful. Most are Canadian-centric.
Finally, I’ll cover the most optimistic personal finance statistic 🙂
Table of Contents
Personal Finance Statistics: Money Stress in The US and Canada
Financial stress is the norm for millennials in the US and Canada.
Millennials in both countries are exposed to many of the same environmental pressures that create money stress:
- Algorithm tailored Ads increase advertising pressures.
- Insane social comparative pressures from social media.
- Ease of access to debt.
- A lack of formal financial education.
This is a combustible mixture that results in failure to control expenses.
Don’t beat yourself up if you aren’t perfect with money. We all have room to improve in this difficult environment.
Money stress in Canada
An FP Canada Survey conducted in Jan 2021 shows that money is the #1 stressor for Canadians who are under 35 years old.
Money is more stressful than work, relationships, and health.
Money stress brings about health stress, interrupted sleep, and a reduced ability to focus at work.
These effects reduce productivity at work – hurting your well-being and income. You may see how this can cause more financial stress, turning into a negative feedback loop.
Money Stress In The US
Millennials in the USA are also suffering, although you would think otherwise when looking at the facade of your Instagram feed.
The Highland Wealth Survey – a survey of 2000 Americans in October 2020 – uncovers the following reality.
The US data backs up the Canadian trends of money stress.
Most don’t have an emergency fund, and about 2/3 of American millennials are living paycheck to paycheck.
Social Media : Comparative Pressure
We are biologically wired to monitor our status relative to those around us. One way we do this is by comparing material items and experiences.
Social media amplifies this effect. It highlights the best (often debt-fuelled) aspect of someone’s life while masking the harsher realities.
As 82% can’t afford a $500 emergency expense, we also see that:
- 72% of millennials wonder how their friends can afford expensive experiences posted on social media. (Schwab 2019 Modern Wealth Survey).
- 74% of Gen Z wonder how their friends can afford expensive experiences posted on social media (Schwab 2019 Modern Wealth Survey).
The Rat Race
I hypothesize that we have a situation where many are going broke trying to one-up other broke people.
This is the “rat race” or “keeping up with the Joneses”.
Wealthy people often live frugally. They spend their money on stocks and rental properties, rather than BMWs, luxury vacations, and large homes.
The path to wealth, described in this post, is a quiet one.
How Do You Define Success?
The way we define success matters.
We fall victim to the rat race when success is defined by external sources like material goods or expensive experiences.
Most sustainable sources of success are free, such as improvement of knowledge, skills, and fitness. Or giving back to the community.
Finally, sustainable sources of success often pay us money. That’s a wonderful thing. The capitalist system works by funneling money to those who provide value to others, and providing value to others brings a feeling of success in itself.
Get the best educational resources.
Access free tools to control and grow your money.
Personal Finance Statistics: Debt for Canadian Millennials
Student Loan Debt
Here is the state of student loan debt upon graduation, using data from Statistics Canada’s results from 2015.
The data is old because Statistics Canada only takes this data in five year periods. I’ll update with 2020 data when it becomes available.
Education is an investment, where returns come in the form of higher future income. Education is an investment in your human capital.
Therefore, student loan debt is debt used to purchase an investment. Similar to using debt to finance a rental property, or borrowing to buy stocks.
And the type of education matters.
For example, a skilled machinist will (on average) have a higher return on investment than a history major. This is nothing against history majors, it is simply the market demand for skills.
Consumer Debt for Canadians
First, let’s define consumer debt as all non-mortgage debt, like vehicle financing, lines of credit, or credit card debt.
- Canadians aged 26-35 have an average of $16,800 in consumer debt.
- Canadians aged 36-45 have $24,800 in consumer debt.
Data was acquired from this Equifax survey.
I consider most consumer debt as “bad” debt for a few reasons:
- It’s used to buy “use assets” that go down in value, like cars, furniture, etc. This deteriorates net worth.
- Consumer debt often comes with high-interest rates.
- The debt is easily accessible and is often used on purchases that satisfy short-term impulsive desires.
I view consumer debt can be viewed as theft from our future selves. This is enslaving and stressful as it takes away from net worth, and freedom.
The high-interest rates mean we steal from the future.
Canadian Income Statistics
The most recent income data from Statistics Canada are from 2019. I acknowledge that this data is a few years old, but I don’t really trust the other sources.
Here are the key pieces of information:
- The average individual pre-tax income in 2019 was $58,400
- Median (pre-tax) individual income in 2019 was $48,200
- After-tax household income in 2019 was $62,900
Average Home Price
According to the Canadian Real-Estate Association:
- the average house price in January 2022 was $750,000.
- In Ontario, the average home sold for $1,000,000 in Jan 2022.
That’s wild, especially given the median after-tax household income of less than $80,000.
But home prices relative to income is not the only factor. The monthly cost of homeownership can be a more useful statistic.
A sharp decline in mortgage interest rates has permitted Canadians to afford a more expensive house for a given monthly mortgage payment.
I suggest you read about the rent vs. buy evaluation to make a rational home purchase decision.
Now onto investing – the place where wealth is built.
Investing is not for everyone. It’s only a factor once you are free from consumer debt and have an emergency fund.
Here are some questions that can help you make good investing decisions:
- Do mutual funds beat the market?
- What is the average Canadian mutual fund fee?
- What returns can I reasonably expect from the stock market?
Let’s dig into the investing statistics that answer these questions.
Fees For Canadian Actively Managed Funds
I had to dig into the raw data to find the average Canadian mutual fund fee.
I randomly selected 5 equity (stock) mutual funds from RBC, BMO and Scotia Bank.
These fees were then averaged.
I found the average fund fee to be 1.69% using this approach.
Performance of Actively Managed Funds
- 85% of US Large-Cap Mutual Funds Underperformed the S&P 500 over the last 10 years (SPIVA Research).
- 83% of Canadian Equity Mutual Funds underperformed the Canadian S&P/TSX composite index over the past 10-year period.
One would expect the average managed fund to provide the market return, minus fees. Therefore, the average (diversified) fund underperforms by an amount equal to the fund’s fee.
A low-cost index fund provides better expected returns because of the low fees. You essentially get the return of the index.
Persistance of Fund Performance
This brings us to a natural follow up question:
Why not just invest in the 26% of mutual funds that beat the market over the last 10 years?
Because the returns of these funds do not persist. Past returns are not an indicator of future returns.
SPIVAs persistence scorecard shows how returns “persist”. Strong recent returns do not predict strong future returns.
The scorecard shows that over a 5-year period, only 3.2% of the top quartile (top fifth) of US active funds remained in the top quartile of performance.
This indicates that fund outperformance is rooted in luck, not skill.
Stock Market Statistics
Reasonable expectations for investment returns are important to maintain sanity when investing. This has been hard during the last decade of high returns, but it looks like we are coming back to reality in 2022.
The long-run returns of global stock markets are reasonable expectations. These returns include multiple world wars, pandemics, and a multitude of other disasters.
I find this data to be grounding as a long-term investor, especially in times of market turmoil. It’s amazing how resilient returns have been.
- Global stocks have returned 5.3% after inflation since 1900.
- Global bonds returned 2% after inflation since 1900.
- US stocks have returned 6.7% after inflation since 1900.
- Canadian stocks returned 5.7% after inflation over the past 50 years (source).
The Most Important Personal Finance Statistic
Now for the personal finance stat that gets me most excited.
About 87% of Canadians under 35 believe their actions can reduce money stress 😊. Only 7% believe there is nothing they can do to reduce their money stress.
People can take ownership over money management to control spending, increase income and invest for a life free of money stress.
This requires that we shed the victim mindset, take responsibility for improvement, and take action.
These stats show the reality of the personal-finance situation for millennials.
Here are a few takeaways that may be helpful in progressing forward on your personal finance journey:
- You aren’t alone if you struggle with money. In fact, you are “normal”.
- You have the power to improve your money situation 🙂
- The financial state of those around you has poor correlation to the quality of their car, home or Instagram page
- Money management is hard, especially in today’s environment of instant gratification. The need for self-discipline is higher than ever.
- Consumer debt holds high-interest rates and restricts freedom. It is often used to spend on goods that decline in value.
- Global stock returns have been super-resilient over the past 122 years.