Like many other students graduating this spring, I’m not quite sure about what lies ahead.
On top of job searching and finding a new place to live, one of the things I know should be a priority right now is managing my money and planning for the future.
But up to this stage, balancing my cheque book has not been high on my priority list, and the minimal financial literacy I learned in high school is long forgotten.
I decided that it’s time to find out for myself what financial options are out there for students and new graduates. To learn more, I spoke with two financial experts. I was surprised to learn how much each company focuses on teaching financial literacy to teens and young adults.
“Every Canadian needs to know how to run a bank account,” said Mary Birkett, regional director at the Investors Group’s Nepean office. “They need training and right now they’re not getting any.”
Bridgehouse Asset Managers, another investing group, has a scholarship program for 16 to 22-year-olds to help promote financial awareness, including a quiz to test their financial knowledge.
“Students are in a learning phase. When you know more about any topic, you grow more confident in it. That’s really something that we’re trying to do, is advance investor knowledge and competency. The scholarship program is one of the ways we do that,” said Carol Lynde, President and Chief Operating Officer at Bridgehouse.
“When we did an investor knowledge survey in 2013, we found that typically for Canadians financial literacy is fairly low, but most of them want to know more,” she said.
“Financial advisors are important because they can help you understand what outcomes you need as you move forward in your life… As a young person, that’s a wonderful place to start because it sets a discipline.”
Even for students and new graduates with some financial knowledge, saving money can often seem impossible. With rent and debt payments to keep at bay — the Canadian Federation of Students estimates that the average debt for students studying in Ontario is $28,000 — it’s no wonder they feel that way.
“I feel like it’s not practical for a lot of students to open a savings account, especially for students who have to pay back loans,” says Riley Malvern, a 21-year-old sociology student graduating this spring. “Right now there’s too many variables that I feel like putting money away isn’t an option.”
Birkett also identifies this as an issue for young adults.
“When they finish university, they’ve got their student loans to pay off, they probably want to buy a car, they might be looking for an apartment… long-term seems too far away.”
She emphasizes the importance of budgeting goals. The best place to start is by making automatic contributions to a savings plan from each pay cheque. Birkett said prioritizing is key. If you have enough money to spend on a case of beer every month, she said, you have enough to put towards savings.
So where exactly should young adults be putting their money?
RRSPs are a good way to save for retirement because you can deduct contributions from your taxable income, though there is a limit. Another option is putting money into a TFSA. These are registered savings accounts that you can contribute to annually up to $5,500, and withdraw funds from at any time, penalty-free. For this reason, Birkett says RRSPs are a better bet for people who need a little more discipline.
Above all, she says it’s important for everyone to take a close look at their expenses and really take the time to think about where you want their money to go.
“Ultimately they’re just numbers on a page. What do you want that money for?” she asks.
As intimidating or unthinkable as saving for the future may sound, taking the time to establish those goals, budget in some form of savings plan, and seek financial guidance from a professional as early as possible will help improve financial awareness and pay off down the road.