wealth inequality

Fixing the Wealth Gap in Canada: Here’s How Minorities Can Start Building Generational

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Canada is one of the world’s wealthiest nations. We have a robust economy (yes—despite inflation), we rank number eight in our number of ultra-high net worth individuals, and our GDP is $1.647 trillion, ranking us tenth among other nations.

Yes, that’s a lot of wealth. But don’t be fooled—it’s not wealth that’s shared equally.

The wealth gap in Canada

Canada has a massive wealth gap, and the lines between rich and poor are often racialized. A few numbers from a report published by Statistics Canada in 2015 suffice to show this:

  • 60% of Black Canadians fall below the bottom half of national distribution of economy family incomes versus 47% of non-racialized Canadians.
  • 8.3% of racialized investors reported capital gains versus 11.9% of those in non-racialized groups.
  • 25.1% of racialized investors reported getting investment income in 2015 versus 30.8% of those in non-racialized groups.
  • $7,774 is how much racialized investors earned in investment income versus $11,428 for non-racialized investors.

And these numbers aren’t limited to investments. If we look at housing, we’ll see that around 57% of low-income neighbourhoods are populated by “immigrants,” whether recent or established. In middle and high-income neighbours, the majority is vastly non-immigrant: 60% for middle-income neighbourhoods and 69% for high-income ones.

To be fair, Canadians are becoming more aware of racial inequalities, as corporations and small business owners alike step up to bring more equality into the workforce. But the past has a way of haunting the present, and, for those in minority groups, the most unrelenting poltergeist is generational wealth.

Generational wealth is the transfer of assets—investments, cash, real estate—from parents to their children to their grandchildren to their great-grandchildren and beyond. Generational wealth is one of the main reasons certain Millennials can afford down payments on houses priced at $1 million and up: they can take out a loan from the bank of mom and dad, helping them outbid other Canadians, often minorities, who don’t have the luxury of a family fund.

How minorities can build generational wealth

How can we start fixing the wealth gap in Canada? It’s not going to be easy. And it might not happen in one generation. But to help Canadians in minority groups turn the tide, here are three ways they can start building generational wealth.

1. Build your own investment fund

Perhaps the best way to amass generational wealth is to invest your money in high-income earning securities, such as stocks.

Stocks have unlimited upward potential, meaning there’s no ceiling on how much you can earn. Of. course, stocks have risks, but if you learn to invest wisely—a skill you can teach to your children—you could possibly accumulate enough wealth to pass down for several generations. 

Another option is to invest in ETFs.

An ETF is a basket of stocks (or other securities) that’s passively managed, meaning it tracks a market index. When you buy a share of an ETF, you get a little piece of each stock. Unlike stock investing, you’ll never beat the market. But, because your money is spread across numerous securities, you get instant diversification.

To start investing in stocks and ETFs, open an account with one of Canada’s best online brokerages. From there, you can invest in the companies you believe have long-term potential. 

2. Strive to own your home

For most families, generational wealth begins with homeownership. And not just your primary home: flipping houses, renting out residential or commercial property, buying vacation homes, or even buying land can all be lucrative ways to capitalize on the Canadian real estate market.

Of course, let’s not be insensitive: for Canadians who are earning less income than the majority, who have traditionally been ostracized from the homebuying market, buying a house or other properties is easier said than done.

One solution is to build a down payment by investing in REITs. A REIT is basically a real estate company that owns and manages numerous properties. As a REIT investor, you and several others pool your money and allow the company to use it for their real estate endeavours. In short, they do the dirty work. You provide the money and earn profits. 

Investing in a REIT can help you capitalize on the real estate market, even if outrageously high home prices prevent you from joining today.

3. Teach your kids about money

Perhaps the most effective way to keep wealth in your family is to teach your children how to manage money prudently.

This includes teaching your children the value of saving money, how to budget, and even the importance of delayed gratification.

For instance, I’ve heard of parents practicing the “delayed allowance” technique. It goes something like this: in addition to giving your kids a monthly allowance, you also give them the option of “investing” it. You say, “you can have $50 this month, but if you wait until next month to spend your money, you’ll get $60.”

Whatever techniques you use to teach your children how to manage their money, do it while they’re young. According to a report by RBC, it’s best to give your children formal education on money before they turn 18, ideally before they leave for college.

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