Five financial moves to make in your 20s

By: Sound Choices • October 13, 2017 • Personal Finance

If you’re in your 20s, there’s a good chance you’ve got a job that pays enough to let you cover your regular expenses while having some money left over. So, what are you going to do with it? While financing your dream car may seem like a good idea, it may not be the most prudent financial decision.

You’re at a great stage in your life, especially when it comes to saving and investing. One of the greatest assets you have in terms of building wealth is time.  With a few smart decisions, you can make sure that you start off your financial journey on the right foot. Here are a few tips to make that happen:

  1. Pay down student debt.
    Canadian household debt is at record levels and while that situation is not dire given low interest rates, it could put many people with high debt levels in financial trouble when rates go up. Establish a payment plan and make sure you direct enough of your income towards debt so it doesn’t overwhelm you.

  2. Open a Registered Retirement Savings Plan (RRSP).
    At your age it’s tempting to ignore retirement planning, but, dollar for dollar, the money you invest in your 20s and early-30s can have a dramatic impact on your retirement savings, more than the money you save in your 40s and 50s. That’s the power of compounding! Check if your company has a Group RRSP matching program or arrange to contribute a small amount every payday.

  3. Open a Tax-Free Savings Account (TFSA).
    The math can get complicated, but it may make more sense to start contributing to a TFSA before your RRSP. In other cases, it may make sense to open both an RRSP and TFSA. A financial advisor can help you decide. Either way, a TFSA is a great way to start building your savings, whether for a short-term goal like a vacation or a car, or to establish an emergency fund for unexpected expenses.

  4. Consider post-secondary education or continuing education.
    Exhibiting a commitment to lifelong education can be great for your career development. Post-graduate degrees and continuing education certificates can improve your earning potential.

  5. Work with an advisor.
    People in their 20s often think they don’t have enough assets to warrant professional advice. On the contrary, now is a perfect time to seek advice. An advisor can help you create a financial plan and answer any questions you might have about reducing debt and saving for the future.

Checklist: Things to Do

  • Build a debt reduction plan
  • Open a TFSA
  • Open an RRSP
  • Check if your employer offers a Group RRSP plan
  • Start contributing a small amount each paycheque (“Pay yourself first”)

Book a meeting with your financial advisor today to put together a financial plan for your personal circumstances. For more information on how an advisor can help, read this article.

The contents are provided for informational and educational purposes, and are not intended to provide specific individual advice including, without limitation, investment, financial, legal, accounting or tax. Please consult with your own professional advisor on your particular circumstances.

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