Buying a starter home, living on one income and staying in the same job for 40 years \u2014 life was very different for older generations and many young people have realized what worked for their parents doesn’t necessarily work in today’s modern world.<\/p>\n
As younger Canadians continue to face high housing costs, slowing wage growth and other challenges, age-old financial adages have become outdated, forcing a rethink of what smart money management looks like today.<\/p>\n
Here are some common rules of thumb for money management that financial advisers say need re-examining.<\/p>\n
Housing should only take up a third of your budget<\/p>\n
\u201cIf you\u2019re trying to stick to this rule, you can only afford to buy a home that’s $500,000, which is well below the average across the country, and it doesn’t go very far in most major cities,\u201d said Jason Nicola, certified financial planner at Vancouver-based Nicola Wealth.<\/p>\n
He cites research that shows just how much things have changed from previous generations.<\/p>\n
The home price-to-income ratio has steadily grown over the past several decades. Data shows that in the early 1980s, the home price-to-income ratio was about two to three. Now, the ratio sits closer to six or seven.<\/p>\n
The home affordability challenge remains even after accounting for today’s lower interest rates. With mortgage rates of about 4.5 per cent today, a young couple with $100,000 in gross income would have to spend at least 45 per cent of their after-tax income just to cover monthly mortgage payments, let alone pay for property taxes, insurance, and maintenance, said Nicola.<\/p>\n
Though he doesn\u2019t recommend it, he said it\u2019s not uncommon to see some households spend up to 50 per cent of their monthly income on housing costs.<\/p>\n
\u201cI think it’s just the uncomfortable reality for a lot of people,\u201d he said.<\/p>\n
Savings will grow with the power of compound interest<\/p>\n
Setting cash aside in a savings account may have benefited significantly from compound interest in the ’80s when rates ranged between 10 and 15 per cent. But with \u201chigh-interest\u201d savings accounts currently typically offering rates of two to four per cent, experts say money should be invested rather than left sitting as cash.<\/p>\n
\u201cPerhaps interest rates, the amount that you could receive has changed, but the power of compounding has not changed,\u201d said Aldo Lopez-Gil, a financial adviser at Edward Jones based in Toronto.<\/p>\n
He explains that given lower interest rates today, compounding growth is best seen in other savings vehicles like the tax-free savings account or first home savings account.<\/p>\n
Story Continues <\/p>\n
\u201cI think there\u2019s a gap in terms of education and understanding as to what investments can be put into a TFSA,\u201d said Lopez-Gil. \u201cIn my experience, it\u2019s a completely underutilized account by Canadians.\u201d<\/p>\n
Nicola agreed that there is still power in the compounding of returns over time, even though interest rates are lower now. That\u2019s why he discourages keeping a three- to six-month emergency fund in a traditional savings account.<\/p>\n
\u201cSure, it’s a great idea and it’s a really nice thing to have that gives you comfort. I just don’t think it\u2019s a hard and fast rule,\u201d he said. \u201c[Very few] of my clients are going to have six months of spending just sitting in cash not earning any interest.\u201d<\/p>\n
Start saving early for retirement<\/p>\n
While previous generations focused on paying down debt as quickly as possible and saving what remained, this approach may be unnecessary for young Canadians today.<\/p>\n
\u201cPeople early in their careers are often in lower tax brackets, so an RRSP might not make much sense,\u201d said Ainsley Mackie, portfolio manager with Verecan Capital Management.<\/p>\n
\u201cNot all debt is bad debt. It doesn’t have to be rushed to pay it off,\u201d she said. In fact, Mackie advised that having some debt and making regular payments will help build credit, a \u201csuper important goal\u201d if you\u2019re going to apply for a mortgage later.<\/p>\n
She cautions against high-interest loans for recreational items like ATVs and snowmobiles \u2014 common \u201ctoys\u201d in her town of Nelson, B.C., where rates on such loans can hover around 21 per cent.<\/p>\n
Lopez-Gil thinks the current widespread perception of how much we need in retirement is overly emphasized.<\/p>\n
\u201cI don’t think there’s a universal withdrawal rate that everybody could use,\u201d he said. \u201cThe four per cent rule has been talked about for decades [but] it does vary by person and their desired lifestyle.\u201d<\/p>\n
Instead, he suggests young Canadians invest in themselves and their future earnings. \u201cRESPs used to be a bit more restricted in terms of what you can use it for, but that has started to really open up,\u201d he said.<\/p>\n
This advice comes as career paths for young Canadians look very different than they did for previous generations.<\/p>\n
\u201cLoyalty with the company used to be rewarded, but today, adaptability in your career more often is,\u201d said Mackie, adding that younger workers now average four years at each job.<\/p>\n
\u201cIt makes sense for people to move around in their careers, get higher pay, broaden their skills, and be able to have a better work-life balance.\u201d<\/p>\n
This report by The Canadian Press was first published Feb. 10, 2026.<\/p>\n
Cathy Miyagi, The Canadian Press<\/p>\n","protected":false},"excerpt":{"rendered":"Buying a starter home, living on one income and staying in the same job for 40 years \u2014…\n","protected":false},"author":2,"featured_media":284531,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[114,145878,268,33348,30356,19293,85,4486,46,145879,17742,266,267,61841],"class_list":{"0":"post-284530","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-compound-interest","10":"tag-finance","11":"tag-financial-advisers","12":"tag-financial-planner","13":"tag-generations","14":"tag-il","15":"tag-interest-rates","16":"tag-israel","17":"tag-jason-nicola","18":"tag-mortgage-rates","19":"tag-personal-finance","20":"tag-personalfinance","21":"tag-savings-account"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/284530","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=284530"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/284530\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/284531"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=284530"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=284530"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=284530"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}