It’s amazing how many times I meet people out in the community who say the exact same line to me – “I want to come see you in a few years when I have more money to invest”.  Each time I tell them the truth, if they want to have more money to invest in a few years, they need to come sit down with me now.  If you haven’t already done so, the time to sit down and create a proper financial roadmap is now, regardless of what age you are.  Proper planning goes far beyond setting up and managing investment accounts.  It must include debt management, budgeting, insurance and a wide array of other issues. 

Budgeting will help young investors to understand their cash flow situation.  This will also allow you and your advisor to find ways to reduce unnecessary expenses and free up cash for more important uses.  Surviving properly off a smaller income in the early years will also better equip people down the road for future financial emergencies such as divorce or job loss. 

A good plan for young adults will work to pay off your highest interest rate debt first and consolidate remaining loans into the best low-cost option available to you.  It will often (but not always) incorporate a plan to start your saving program now.  You should start this off small and increase your contributions as your income level rises and/or you pay off more of your other liabilities.  It’s important that you don’t set your contribution levels too high at the start, because you’ll undoubtedly be forced to stop these contributions before too long.  The best way to save is automatically – with an automatic monthly contribution that goes out right after payday. 

Your custom-tailored financial plan will also look to utilize multiple account types including TFSAs, RRSPs & even RESPs for your children.  Each is quite unique and plays an important role in your financial future.  Allocating the bulk of the savings to an RRSP plan is often a good idea, but many people make a mistake in doing so.  At tax time, when the CRA sends you a refund cheque due to your RRSP contributions, this is not the time to go shopping!  For the RRSP program to work properly, you must apply this CRA refund to either your outstanding debt load, or back into your investments.  Anything else and you’re missing out on the advantages of using the RRSPs to begin with.

Young people today must face the reality that many will not have the comfortable company pensions their parents now enjoy.  The government is simultaneously reducing the amount and levels of support that they will provide.  Now more than ever, it’s up to individuals to ensure that they’re on the right track for financial security and retirement.  If you find yourself one of the people saying “I have to wait until I have money to invest”, now’s the time to reconsider.    

Scott Millard, Senior Executive Consultant, IG Wealth Management
Investors Group Financial Services Inc.

This is a general source of information only. It is not intended to provide personalized tax, legal or investment advice, and is not intended as a solicitation to purchase securities.  Scott Millard is solely responsible for its content. For more information on this topic or any other financial matter, please contact an IG Wealth Management Consultant. Mutual funds and investment products and services are offered through Investors Group Financial Services Inc.  Additional investment products and brokerage services are offered through Investors Group Securities Inc. Investors Group Securities Inc. is a member of the Canadian Investor Protection Fund.