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What Is Insolvency?

Bankruptcy Or A Consumer Proposal?

What Is Insolvency

What is insolvency? It’s nothing good. The study of millennials is important to study. They are going to be the next generation to take over from the large population. This takeover is from their parents who are the soon to be the retiring baby boomer generation.

This article will discuss how debt and insolvency are affecting millennials and their financial futures today.

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What Is Insolvency? | Insolvent Person

Statistics from Industry Canada report that in 2006 7.1%  of insolvency filings (either a bankruptcy or consumer proposal) were as a result of the age group 25-29 years old.  This is compared to 10.8% in 2005.

As a millennial, I can echo these comments.  I have a number of friends personally who have been unable to find the high paying long term career jobs that their parents have.  In addition, the parents are holding onto those jobs longer, as the parents cannot afford to retire, leaving less hope for future career opportunities.  I believe we are in one of the greatest eras ever to live based on the standard of living, as a result of all our technological advancements, but most jobs out there are entry-level positions that are low paying.  Therefore most millennials need to work two or three just to make ends meet.

According to 2013 research from the Boston Consulting Group, millennials spend the greatest amount of money in the coming year on fresh fruits, organic food, and natural products.

I believe there is hope for my generation to be more financially prudent than my parent’s generation. With the amount of available financial knowledge education out there we have no excuse.  We must become better savers than spenders.

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Where Is The Debt Coming From?

These AFS products scare me, because they charge enormously high-interest rates, and target the most vulnerable in our society.  Most of the people who use these products do not realize the cost of borrowing and find themselves stuck in the proverbial hamster wheel unable to get out.  Coupled with high student loan payments, AFS products are a big cause of insolvencies in this demographic.

Cited from the National Financial Capability Study, half of the millennials who are credit-card users say they carried over a balance—for which they were charged interest—in the last 12 months. A sizable share has been hit with late fees (22%), over-the-limit fees (13%), and fees for cash advances (14%).  This is just more debt that is unnecessary.  I find it frustrating that the credit card companies can get away with such power to charge these large fees.  With more knowledge and education I think the millennials can do a better job avoiding this debt.

I am still optimistic that good spending habits will be a saving grace keeping this generation away from insolvency.

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Personal Bankruptcy| What Is Insolvency?

How is Generation Y different? There are a number of reasons I believe this generation will be more responsible with money.  As already mentioned generation y will not have the high paying jobs that the boomers had.  With lower incomes, and fewer assets it is not as easy as this generation to get into large amounts of consumer debt.  In addition, they do not spend as much as their parents.  The generation is also averse to the big banks, and take pride in dealing more local and within their communities.  If faced with debt problems this local banking mentality will allow the debt issues to be resolved easier than with a large chartered bank.

Another differentiator is that this generation will not inherit as much wealth as their parents did.  Due to longer life expectancies and poor retirement planning the millennial will only inherit around $50,200 on average.  Cited from a survey done by Vancity in 2016.  The poor planning of our parents is going to put more pressure on the millennial when they get to retirement age, and therefore our economy and already dwindling Canada Pension Plan.

All in all, there is hope for the future.  We live in a great era filled with opportunities, and a great standard of living.  Although with lower-paying jobs, and less transfer of wealth the echo generation is going to be able to live a simpler more stress-free existence.

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