Graduating and in need of guidance

About to graduate with no student loans, 22-year-old Hillary Johnstone asks professionals where she should start parking her money.

I know I’m in a unique (and lucky) position.

I’ll be graduating this April with a Bachelor of Journalism degree and absolutely no student debt, thanks largely to scholarship money.

Unfortunately the majority of my peers are in a different situation. The Canadian Federation of Students estimates the average student debt is $27,000. More than 60 per cent of post-secondary students will graduate with student loans. Yikes.

As I begin work, I wonder where I should be putting my money. Retirement is a long way off and there are so many acronyms floating around: TFSAs, RESPs, RRSPs. I’d also like to travel and own a home someday. What should I do?

There was only so much information that applied to my current situation in “The Ultimate Kids Money Book” that my dad bought me when I was nine (and that I recently found under my bed). So, I decided to call in the professionals.

“You’ve got to start thinking about what your life goals might be, and you might not even be able to know,” said John DeGoey, a financial planner with Burgeonvest Bick Securities Limited in Toronto.

“Your goals might be saving for a marriage, buying a car, or for a down payment on a home,” said DeGoey. “If those are your sorts of goals, then chances are keeping your money, safe, liquid and short term, something that is a high-interest savings account…is probably the best thing you can do.”

DeGoey recommends I put my money into a Tax Free Savings Account for now, and an Registered Retirement Savings Plan down the road once I have a bigger tax deduction.  RRSPs are a great way to save for retirement, because you can deduct contributions from your taxable income. However, there is a limit.

A TFSA is a registered savings vehicle that you can contribute up to $5,500 to annually. It’s an attractive savings option because you can withdraw funds at any time, penalty-free. You also aren’t taxed on any investment income earned in the account.

DeGoey wasn’t the only one to suggest putting my money into a TFSA.

Vickie Campbell is a financial advisor with Ryan Lamontagne Inc. an Ottawa financial planning firm. She also said a TFSA is best for me based on my short-term goal to travel.

And even though retirement is more than forty years away, she did recommend I make a plan for retirement savings.

“Definitely you will want to start thinking right away about saving for your retirement…before you have a lot of other obligations, like a house,” said Campbell.

She said that saving up to travel is fine, but that it shouldn’t come at the expense of my future.

“When you have more expensive years…that money that you started saving right off the bat, will compound in terms of earnings on that, and you’ll find that you have that little nest egg set away, before you’ve even realized it,” said Campbell.

So where does all of this leave me? Feeling a lot guiltier about that dress I bought on the weekend that I probably don’t need, and leaning towards opening a TFSA right now, but also a RRSP in the not so distant future.

It’s looking more and more like my RBC Little Leo savings account just isn’t going to cut it anymore. I guess I’ll just have to learn to embrace all these new acronyms.