This 25-year-old just immigrated to Canada and wants to buy a home but was laid off before the pandemic. How can he still save while being unemployed?

John immigrated to Canada less than three years ago to find opportunity. The 25-year-old has a bachelor’s degree in civil engineering and a master’s in construction management, but finding a job was still difficult.

“I worked a few jobs here and there, and was able to save up money as I stayed with family.” He was laid off right before the pandemic and now just feels lost.

Eventually he was able to rent a basement apartment with his mother in Etobicoke. He used savings from the odd jobs and landed his first salaried position as a project co-ordinator with a general contractor. It paid $ 55,000 a year and moved up to $ 60,000 in 2019.

But just before COVID-19 lockdowns shocked the economy, John was laid off due to downsizing.

Since then, he’s been interviewing for new jobs, but is currently still stuck as most companies are in a hiring freeze due to the pandemic. His current source of income is employment insurance of $ 2020 a month.

“Luckily, I’m still in a position that I can regularly contribute to my TFSA and high-interest savings account, but I feel with the current market I can make some better long term investments that could pay out in the long run,” he says.

Despite his rocky employment situation, he still feels fortunate to be ‘comfortable,’ living with his mother who is cooking most of his meals during this unprecedented situation.

The typical day begins early, even for an unemployed millennial. He’ll get up early for a 5 kilometre run, catch up on news, and eat breakfast and lunch at home. Video games will be in the mix mid-afternoon, and Netflix binging in the evening. Sometimes he’ll even convince his mother to let him cook a meal and go back to applying for jobs.

“I learned how to cook by watching videos on YouTube,” he said. “Overall I saved a lot of money by keeping my eating out costs to a minimum and investing in Tupperware.”

On the rare occasion that he does order takeout, he keeps his meals to under $ 10 with great self-control.

John’s primary goal is to make Canada his home, and that starts by making a substantial down payment on a home to minimize monthly costs and potentially invest his savings. Currently, he has $ 15,000 in his HISA at 2 per cent and another $ 3,000 in a TFSA.

“I was also saving to buy a car this year, and I managed to stash away about $ 10,000, but right now that money is sitting in my chequing account,” he says.

He wants to know now if his money would be better utilized investing in the stock market or a long-term investment in his HISA five to 10 years from now.

“Overall looking to revamp my investment strategy or reallocate my assets towards something high risk but long term, and take advantage of the economy while I can.”

We asked John to give us a snippet of his spending habits.

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The expert: Jason Heath, managing director at Objective Financial Partners Inc., breaks it down for John.

“I feel for John. It’s a tough time to be looking for a job. It seems like he’s doing a good job of keeping his costs in check while receiving EI. Given he was already on EI before COVID-19 led to a provincial lockdown, he won’t qualify for the Canada Emergency Response Benefit,” Heath writes.

  • John doesn’t have any debt and is contributing to his TFSA even while on EI. Good for him. Most people would be drawing down savings or incurring debt while off work.
  • He mentioned researching stocks, and the one thing I always caution DIY investors is that it’s tough to be your own portfolio manager. You generally need to own 15-20 stocks at minimum to have a properly diversified portfolio, and it may be easier for a DIY investor to consider index or exchange-traded funds, or at least low-cost actively managed mutual funds instead.
  • I got a chuckle out of the concept of investing in Tupperware. Time spent learning to cook and avoiding eating out has obviously paid off for John, and is a worthwhile investment for anyone looking for a way to cut costs.

  • He mentions he has $ 15,000 in a high-interest savings account at 2%, but only $ 3,000 in his TFSA. Of note is that he is paying tax on his HISA interest income, and that interest could be tax-free in a TFSA. A TFSA is just an umbrella to shelter different types of investments from tax, and that can include a high-interest TFSA. He doesn’t need to invest in just stocks in his TFSA, so should consider additional TFSA contributions to maximize the tax-free growth of his savings account.
  • With a five to 10-year time horizon, I think that’s it’s OK for him to have some stock exposure. But young people often have unexpected expenses in their 20s and 30s, so he’s wise to have a savings account in addition to his longer term TFSA stock investments.

Results: He spent more. Week 1 spending: $ 1,340.56 Week 2 spending: $ 1,490.69

How he thinks he did:

“I think I did well,” John says. Recording his expenses during two rent payment weeks, he ended up spending a bit more the second week, but is more confident in how to create a stricter budget since being laid off. “If not for COVID-19, I’d spend a bit on clothing and shoes, a gym membership, and a weekend or night out and gas and insurance,” he said.

Take-aways: Moving forward, John will focus on putting his savings toward his TFSA. “One thing I hadn’t realized for the long run was how much tax I would end up paying for my HISA. While a safe avenue I can understand why it’s not the best for long-term investing,” he said.

To start this process, John says he’ll be taking money from his HISA chequing account and allocating it to his TFSA. Living through COVID-19 also gave him a sense of what’s important even post-pandemic, starting with how to survive on $ 2,020 a month. “I’m using natural resources to keep myself entertained through gardening, outdoor running, and improving my cooking skills,” he says. “All these things will contribute positively towards my life in both an economical and physiological standpoint.”

Are you a millennial living in Toronto or the GTA and need help with saving your money? Be a part of #MillennialMoney and email ekwong@thestar.ca
Evelyn Kwong

TORONTO STAR