08/01/2018 14:32 EDT | Updated 08/01/2018 14:36 EDT

Booming Gig Economy Can Mean 'Financial Challenges' For Canadians: BMO

Temporary and contract employment is "growing at a phenomenal rate."

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The gig economy is here to stay, and that's posing some financial challenges for Canadians who end up working in it — by choice or by circumstance.

The labour market for temporary or contract employment in Canada is "growing at a phenomenal rate that shows no signs of slowing down," according to a study by Bank of Montreal's wealth management department.

The study cited a report from one of Canada's largest temp agencies that said more than one in four employees are freelancers, with contingent workers making up more of the workforce than part-time employees. According to Statistics Canada, 2.18 million Canadians were considered temporary workers in September 2017.

The BMO study said working on your own terms can bring "financial challenges that should be addressed in order to achieve your short- and long-term financial goals."

Reasons vary across generations

BMO's survey showed Canadians have multiple reasons for actively choosing short-term work, project-based gigs, and side hustles.

Aside from being unable to find full-time or permanent jobs, Canadians may choose to work in the gig economy because of the autonomy and control it provides; as a way of making money while searching for a better job or balancing having a family; or as a way of making extra money on the side.

The main reasons also varied across generations. Fewer-than-average millennials cited career-family balance as a reason for working in the gig economy (38 per cent among millennials, compared to 42 per cent for the population as a whole), while baby boomers were more likely to say autonomy and control was their rationale (70 per cent among boomers vs. 49 per cent among everyone).

The biggest downsides to working in the gig economy? No benefits, no sick leave, debt accumulation, and not making enough money, according to the survey's respondents.

BMO Wealth Institute director Chris Buttigieg told HuffPost Canada it's important to have a "minimalist budget" that uses the "absolute rock bottom amount of income" you need, and incorporates an emergency fund.

That emergency fund could even be a line of credit, although that means you'd be accumulating debt.

"Even when you're accumulating debt, you should always be making sure that (you have) some kind of repayment plan embedded as one of your cash outflows to manage that debt and hopefully pay it off over time," Buttigieg said.

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It's not all bad news, though. Buttigieg said it's still possible for gig economy workers to have comfortable retirements, for example. He recommended stashing money in a tax-free savings account (TFSA) because of the lack of a tax penalty for taking money out.

"Should one month become a difficult, month income-wise, there is that opportunity to dip into the TFSA to access some of those funds," he said.

For gig economy workers whose work situations are more flexible, it's important that their savings plans are also flexible, Buttigieg said.

"So that means that they should be reviewing their savings plan, their financial plan perhaps more often than others," he said.

The survey for the BMO Wealth Institute was conducted by ValidateIt Technologies Inc. from Nov. 29, 2017 to Dec. 2, 2017 with an online sample size of 1,005 self-employed Canadians. The overall probability results for a sample of this size would be accurate to within +/- 3.01% at the 95 per cent confidence level.