When was the last time you actively planned for an event that was 40 or even 50 years away? Chances are, you didn’t. Most young people probably have the same attitude about planning for retirement – it’s not an immediate concern and there will be plenty of time to do it in the future. But with about one third of Canadians having no retirement savings at all, learning how to be smart with money early on is an important skill for the young people in your life to learn.
With that in mind, we asked three Chartered Professional Accountants (CPAs) who volunteer as financial literacy educators for their top tips that young people can use to manage their money – and ultimately, plan for a successful retirement.
Poonam Deol, CPA: Understand your options – there are people who can help
“As a young person, it’s important to have a good understanding of different saving options (i.e., TFSA, RRSP, and direct investing). It’s not common for someone to teach you how to decide what to invest in and why you should pick one option over the other depending on limits and circumstances.
I know this could sound a bit intimidating, but I would highly recommend booking an appointment with a financial advisor at your bank to learn about some of your saving options. Before the appointment, think over your short-term and long-term goals and how much cash flow may be required to achieve them. This will help create much more successful financial planning."
Candice Hartwell, CPA, CMA: Getting started on budgeting is as easy as…20/50/30
“Budgeting is key to saving for retirement. A great rule of thumb that I wish I had followed when I was younger is the 20/50/30 rule for setting a budget: for every dollar you receive, put 20% to savings, spend 50% on your “needs” and 30% on your “wants.” Learning to differentiate between your financial obligations, your financial goals, and your “nice to haves” is a lesson that you will carry with you for the rest of your life.
Alongside this, make sure you know where your money goes. Don't just set up a budget, track your spending for a few months to see how much you actually spend (and get an idea of where you can cut back).”
Claire Shawcross, CPA, CGA: Time is on your side, so make saving a habit early on
“Don’t ever assume that the government is going to take care of you and do not assume that an inheritance is a retirement plan. You should get into the habit early of putting aside something for retirement – a dollar invested today by a young person will grow exponentially between the age of 20 and 65, and anything else is gravy.
No goal is unattainable financially, it is sometimes just a matter of time that impedes your immediate satisfaction. If you set up a proper timeline and budget, you can achieve your goals.”
If you’d like to guide the young people in your life on a smart financial path, CPABC’s Financial Literacy Program offers free and unbiased financial literacy workshops. Email CPABC's FinLit team to find out about our financial literacy presentations geared to 48 different topics, including money skills for young people.
Leah Giesbrecht is a communications specialist for CPABC.