How younger Canadians can prepare themselves for a potential recession
Source: The Canadian Press
"I'd be lying if I said a looming recession wasn't worrying," says Braveen Kumar, who is currently working on building his freelance business.
Amid soaring inflation and the Bank of Canada increasing interest rates more aggressively relative to past tightening cycles, concerns about a possible recession are growing. A lackluster stock market is adding fuel to the fire, as market declines tend to happen before a recession strikes.
Kumar recently left his job in tech and even though he managed to save eight months' worth of money for living expenses in order to make the career change, he is budgeting much more diligently now since he does not have a regular salary.
Camille Horrocks-Denis is a documentary media student, and while she is supported by provincial loans and grants, works two jobs and lives with her partner, the high cost of living in Toronto is making her day-to-day more challenging as she considers the potential impact a recession might have on someone like her.
"One thing for sure is that being in the arts industry, there is no guaranteed job (in my field) waiting for me after graduation, therefore a recession could potentially affect me deeply," she says.
CIBC economist Katherine Judge is not sounding the alarm quite yet on a recession, but says if Canada does fall into one, it could be in late 2022 or in the first half of 2023. She doesn't anticipate it being as bad as 2008, however.
"The 2008 recession was atypically deep, and if we were to experience a recession this time, odds are it wouldn’t be as severe," she says. "We expect the Bank of Canada to hike a bit less than the market is pricing in, thereby avoiding an outright recession if the (U.S.) Federal Reserve is also cautious about overdoing hikes."
Nevertheless, personal finance experts say "recession-proofing" oneself right now is imperative.
For people in their 20s and early 30s, the COVID-19 pandemic has been the biggest global event they've had to navigate as working adults, and it has forced many to look at their finances more carefully and even re-examine their career paths, putting them in a position to keep the momentum of personal growth going.
Personal finance educator Kelley Keehn believes a lot of "recession-proofing" is based around how young adults shape their career trajectory.
She says people should view themselves as a corporation.
"If you're always thinking of everyone as a customer, always looking for opportunities because you're thinking like a company, that's really going to serve you well," she says.
She also emphasizes the importance of broadening one's skillset – through certifications, courses, books, and even by following reliable social media channels and influencers – so it becomes easier to pivot in the job market if necessary. Continuing to network is just as important if not more important, she adds.
Marketing professional Ankit Mishra says he is "quite concerned" about a potential recession and is upskilling as a result, learning French and researching industries that could be resilient during an economic downturn. In his case, he's exploring how technology could make life in cities better and learning about sustainability in the mining industry.
When it comes to saving and spending amid sky-high inflation and recession concerns, Keehn says it is important to thoughtfully consider whether or not certain activities or purchases will actually bring value or ultimately hurt one's bank account. That's especially true as the world reopens and spending opportunities increase.
She also urges young people to assess their financial capabilities and limitations thoroughly before investing in the stock market, even during bull market runs, which we saw after the March 2020 selloff and through 2021 – a period that enticed many young people to jump in with the hope of seeing big gains.
She cites her own investing mistakes from when she was much younger, in particular, putting money into the market before she could really handle the implications and then being forced to pull it out when it was at a loss.
"You have to be clear on: can you actually be invested or do you just need to save money right now," she says.
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