At QuickBooks Get Connected, I had the opportunity to speak with a young person who works for an app partner. After quite a bit of chit-chat, he asked what my financial advice to a young person would be. I thought it might be helpful to share my answer with our readership.

Table of Contents

Your Money, Your Right, Your Responsibility

If you don’t take care of your money, somebody else will.

These are a couple of things we frequently say to clients.

As a young person, this is even more important as there is a lifetime of earnings ahead of you that you need to be responsible for. The best thing you can do early in life is to educate yourself, decide what is best for you, and set some goals.

This could differ greatly from what is best for your peers and their goals.

Start with the End in Mind

If you’re a regular reader of our blog articles, you’ve probably heard this before. You need to decide what is best for you – nobody else can do this for you. You need to choose the circumstances that you want to have and create a plan to get yourself to where you want to be.

Though there are a lot of financial professionals out there who can help, and there are also a lot out there who would be happy to help themselves to your money.

By educating yourself, you’ll have a better idea of the type of financial professionals you want to work with and will be able to determine if they are helping or exploiting you.

Some good questions to ask yourself are:

What kind of career do I want? Or do I just want to pay my bills?
What kind of family life do I want? Do I want to get married and have children, or not?
Where do I want to live? Do I want to rent or own?
What kind of lifestyle do I want to have? Is it realistic?
Do I want to leave a legacy? If so, what kind of legacy do I want that to be?

Without a goal, planning is pointless, so start setting goals. Once you’ve set some goals, you can start planning on how you’ll achieve them.

Plan Ahead

More and more young people live with their parents until their mid-twenties or even into their thirties and feel like home ownership is impossible. If you want to live on your own, you’ll need to amass some resources to do things like get a lease agreement or make a downpayment on a home.

And then, once you’ve secured shelter, you’ll need to furnish it.

How much you’ll need will depend greatly on where you live and the lifestyle you choose. If you’re going to live in a more rural location, though the cost of rent or housing might be lower, the costs of transportation will be higher, so that will need to be considered.

When you’re making plans, you need to be realistic about the different facets of your goals and how you can go about achieving them. When planning, it is very useful to imagine that nothing is impossible. This provides different patterns of thinking that can lead to creative solutions.

Defer Gratification

One challenge that many people have, especially when living paycheck to paycheck, is failing to set goals and priorities, and instead spending more than they need to on immediate impulse or convenience.

If you can defer your gratification, you can often spend less and get more. In particular, if you create and stick to your plan, you can get ahead financially. It is possible.

Taxes – Understand and Use Registered Accounts

Registered accounts are specific programs that governments have created over the years to help people. For this article, we will only be discussing the registered programs that are most likely to impact a young Canadian in general detail.

The most well-known of these is the Registered Retirement Savings Plan.

RRSPs

Most people know what these are. Registered Retirement Savings Plans allow you to take income from today, invest and earn on it, and pay tax in the future. Contributions to RRSPs often result in tax refunds when it comes time to file.

The contributions you make need to be invested to really have the best results. If you make the contribution and just have it sitting in an interest earning account, you’re likely losing buying power against inflation.

Once you’ve invested in your RRSPs, there are a couple of interesting programs you can use to help achieve your goals.

Home Buyer’s Plan (HBP)

This program allows you to borrow from your RRSPs to put a down payment on a home. In April 2024, the limit to borrow has increased to $60,000. You have to repay your loan by contributing to your RRSP and indicating the portion of the repayment on your tax return.

If you fail to make your designated repayment, that portion will be added to your income for that tax year. Currently, there is a grace period of 2 years and the loan has to be repaid over the following 15 years though there has been discussion about expanding these terms.

Note that you don’t need to have contributed to $60,000 to fully use this plan. If you contribute regularly and invest wisely, you can achieve this goal without making $60,000 in contributions.

There are qualification requirements to participate in the Home Buyer’s Plan, so make sure you check before utilizing this program.

Lifelong Learners Plan (LLP)

The Lifelong Learners Plan allows you to borrow up to $20,000 ($10,000 per year) to finance your education as a mature student. This can also be used to help finance the education of your spouse or common-law partner, but cannot be used to help your children.

Borrowed amounts need to be paid back over 10 years. Similar to the HBP, if you are required to make repayments but fail to, the repayment amount will be added to your income.

However, when you need to start making repayments is a little more complicated, so make sure to read up on this program before making any withdrawals.

Tax-Free Savings Account (TFSA)

This registered program allows you to earn a tax-free income within it. It differs from the RRSP in three main ways:

Contributions are from after-tax dollars and do not get included in your tax return
This account is tax-free instead of tax-deferred. You’ll pay tax on RRSPs eventually because you didn’t pay tax upfront. With a TFSA, you pay the tax up front and will never pay tax on the earnings within the account (some exclusions apply.)
The amount goes up the same for everyone every year, while your RRSP limit goes up based on your earnings.

This is one of the most powerful tools available for Canadians – particularly if they don’t yet have a plan. This is a great holding place to invest savings while making plans. The best part is, withdrawals you make can be re-contributed the next year. It’s extremely flexible and can be leveraged in a whole slew of ways to help you achieve your goals.

First-Time Home Savings Account (FHSA)

This is a fantastic new program that is almost a blend between RRSPs and TFSAs. The contributions are deductible from income, like an RRSP, and the funds can be invested in your first home, upon which there is no capital gains tax, essentially making these funds tax-free!

If you don’t end up buying a home with these funds before the time limit is up, you can have them transferred to your RRSP without impacting your RRSP contribution amount.

Between the FHSA, the HBP, and TFSA, a couple who has planned ahead, made their contributions, and invested their funds, can have more than $200,000 to put down toward their first home!

These are powerful tools and they can do a lot for you, but you’ll have to have a goal that is more powerful than the pull of immediate gratification like a night at the bar, a trip, a sporting event, or a concert.

Other Programs

There are other programs that can help Canadians in different ways, but they don’t really apply to my advice for a young adult, so I won’t go into any detail here. They are the Registered Disability Savings Program (RDSP) and the Registered Education Savings Plan (RESP).

Achieve What’s Best for You

Remember, it all starts with you. Only you can decide what you want. Only you can set goals that are in your best interest. Remember, start with the end in mind, dream big, and write down those goals.

Feel free to reach out to us if you’d like any help achieving yours!