How Young Adults Can Still Thrive Financially
Much has been written recently about the financial state of young Canadians. The Globe and Mail’s Rob Carrick thinks today’s young adults have it tougher than ever, and financial expert Kurt Rosentreter thinks Canadian 30 year olds are screwed because we spend too much time on the internet.
I get it. We’ve just experience a massive recession and Canadian house prices are at an all time high. Meanwhile, tuition costs are sky high and employment is hard to find right out of school. When you do find a good job, chances are there’s no company pension, since those are disappearing at an alarming rate.
With all that’s gone wrong in the economy lately, it’s hard to see the silver lining for today’s youth.
Luckily, it’s not all doom and gloom. There are plenty of opportunities for young Canadians to thrive financially.
Attending Post-Secondary
Some students waste many years (and dollars) in university and college trying to find out what they want to do with their lives. A year or more of general studies, or changing program major’s mid-stream can easily lead to an extra few years of school and thousands of dollars in additional expenses.
Related: What If You’re Not University Material?
The ones that get ahead are the students who quickly find their passion, work or intern during the summer in their chosen field, do co-op work in their final year and graduate in four years. Get in, find out what you want to do, and try to graduate without tacking on a couple years worth of unnecessary expenses.
A great example of this is the Master of Science in Nursing program. It is possible to earn this degree through an online university while already working in the field, which gives these individuals all kinds of advantages.
For starters, they will be earning money while they advance their education, so they can avoid going into debt. In addition, learning online allows them to complete coursework on their own schedule, so they do not have to take time off from work. Hospitals and clinics are always looking for nurses, so this degree definitely provides a fast track to a meaningful career.
Entering the Workforce
Throughout your career, you’ll be surrounded by campers and climbers. Be a climber, especially early in your career. Think of each stop along the way with a three-year plan in mind. In year one, learn your job. In year two, excel at your job. And in year three, learn your boss’ job.
Related: Networking To Advance Your Career
Volunteer to lead a new company project, or take the initiative to make your business unit more efficient. Show your superiors that you have what it takes to move up the corporate ladder. It will come in handy when a promotion comes up or it’s time to ask for a raise.
Owning a Home
Young Canadians can save on the overall cost of home ownership throughout their lives by staying in their houses longer.
The average Canadian moves between 5-6 times in their lifetime. Moving every few years can get awfully expensive when you’re paying $15,000-$25,000 in real estate fees, plus the other costs of buying and selling a house.
Related: Saving Real Estate Fees – Is It Worth It?
There’s an argument to be made for buying a bit more home than you need if it means avoiding the temptation to upgrade your home every few years
Starting a Family
Starting a family before you are financially prepared can really set you back. Don’t get me wrong, having kids is a wonderful experience – but don’t underestimate how much it will cost to raise a family. You don’t want to be choosing between buying diapers and making your minimum credit card payment.
Related: How To Survive And Thrive As A Single Income Family
Waiting a few years to have kids can have tremendous financial advantages. Once you reach your thirties, hopefully you’ve paid off any non-mortgage debt, your career is on the right track and you’ve established good savings habits.
Starting a Side Business
Some people can turn their hobbies into a lucrative side business. Look at some of the entrepreneurs on Dragon’s Den who work on a side hustle on evenings and weekends.
I know quite a few 20 and 30-something’s who run a successful side business. Some of these include landscaping, photography, graphic design, freelance writing and running an online store.
A side hustle can help compensate your regular job when wages remain stagnant and promotions start to dry up.
Using your savings – tax free
One savings tool that wasn’t available for older generations is the Tax free savings account. Canadians start building contribution room in their TFSA once they turn 18. Money can be withdrawn from a TFSA at any time with no tax consequences, and any amount you withdraw is added back to your contribution limit for the following year.
Related: First Time Home Buyer: HBP Or TFSA?
But while older Canadians have complained about the low $5,000 annual contribution limit, the TFSA is a perfect fit for young Canadians. This account is highly flexible and can be used for emergency savings, medium term savings (like for a car or down payment on a house) and as a retirement savings account.
Final Thoughts
Every generation has had to overcome some type of adversity. The normal reaction is to complain that we weren’t dealt a fair hand, but inevitably we must adapt and respond to our changing environment.
This generation of 20 and 30-something’s probably won’t retire at 55. In fact, there’s a good chance we’ll be working until we’re 70. Hopefully we’re doing what we love (and it’s part time).
But I don’t believe young Canadians are screwed financially – not all of us, anyway. Some need a good kick in the ass to get going, but most of us will be fine.
Some of us even use the internet to help improve our finances.
I really think just not spending what you don’t have is the biggest thing you can do to get ahead. And include in the requirements before buying luxuries building up a safety net. I don’t think you have to build up 6 mo or a year of safety before splurging some but set an amount to save to build that up (say $200 a month) and that gets subtracted before you see how much you have to spend on luxuries.
School costs are tricky. I don’t argue with going into debt to pay for school, but it can become an issue to pay large debts off. I also don’t argue with going into debt for a house, but again you can get into trouble if you pay too much.
A side income can be very good. Especially if you want more than you earn, then don’t go into debt, instead find a way to earn more first and then buy what you want.
@John – Creating (and sticking to) a budget is essential to getting your finances in order. If you can’t get that right, the other stuff doesn’t really matter.
Great post. Will promote this week.
I agree with John above, I think a small side income (or a few side incomes) can be great.
@Mark – thanks! I’m all for multiple streams of income 🙂
Excellent advice; thinking back to my first year at university and making a conscious decision to work part time so as to reduce the amount of student debt I would acquire and at the same time building up a RSP which served as a down payment toward my first home purchase when I completed university.
There are some great savings vhicles available as you point out, and making savings automatic is a lot easier to do — and easier to stick with.
@Farhaneh – you’re well ahead of the game if you were thinking about your financial future in your first year of University.
We have a similar problem in the United States. I agree that it not a bad hand that we have been dealt, but a problem that has been self-inflicted. The only cure is to make a game-plan to fix it and do it.
Great read! Call me old fashioned but I still believe that with hard work and a little determination, financial stability can easily be achieved even at a young adult stage.
@John – I agree. These sweeping generalizations from the media – it comes off like the tired “kids these days” cliche that we hear so often.
Resourceful people, old and young, will find ways to get ahead financially.
Great article! We’ve followed much of this advice after making a few small mistakes in our early twenties. We are now in our mid twenties and doing pretty well now. It hasn’t been easy because most of the people our age woke up to the fact that money mattered much later than us so there was a lot of peer pressure to overcome and it was lonely at times. Now though, those same people that we were envious of before are now wishing they were in our boat and working hard to get here while we are finally able to relax a bit!
@Marianne – the earlier you have that financial awakening the better off you’ll be.
Great advise. With the way the economy has been going you are smart to suggest these things. I think most importantly knowing what you want to do before you go and spend the extra dollars on wasted classes.
It was not any different for me when I started out mid 70’s.But I choose to become a Trades Person two times that makes a healthy 6 figure Income, but I noticed not everyone can or want to work with their hands for a living.There is plenty of jobs as a trades person (Albrta needs 100000 skilled workers).I think that is the Problem most people want a white colar job and I won’t feel sory for someone that does not get what he/she wants instead doing what pays the bills.BTW, even today there is less and less people retireing at 55 not just todays Generation.
@Rudy – getting into a trade can be an excellent choice for young Canadians. I agree that many new grads expect a cushy 9-5 white collar job right out of school.
Wow! Using the internet to improve your finances??? Who does that? 🙂 Great post. I especially like the home advice…don’t move over and over. An East Carolina University study recently showed that people hoping to own a “starter home” are better off just renting longer. Buy bigger and stay or keep renting.
@Average Joe – I definitely agree with that. We tend to focus too much on getting into the housing market without giving much thought to our long term needs. Moving 3-5 times in a decade can destroy your wealth.
I have no doubt that we can do all of these things as young adults, we’ll just have to wait longer than our parents did. Or buy smaller. Or pick and chose.
I liked this point especially in this post:
“Think of each stop along the way with a three-year plan in mind. In year one, learn your job. In year two, excel at your job. And in year three, learn your boss’ job.”
I hadn’t ever really thought of it like that. I’m currently in a temporary position with a company that will be very stable in the long run, but I’m sure I’ll be able to find permanent employment with them. When/if I do, I’ll definitely be looking at making goals like these!
@Daisy – I took that approach with my career in hotels and went from the bellman to Director of Sales in 5 years…and then to GM in another 5 years. I can’t say there wasn’t a lot of luck involved, but that was my mind set and it worked.
I would also say that parents should be more pro active and talk about and make sure that their children understand exactly what they need.
Right on, that is what my parrents did to me.
As long as young people these days have the attitude that they can make it and work to make it true then they will be fine. I like the point of learning your boss’ job after mastering your own. That would speed up the next job so hopefully it doesn’t take three years again.
Multiple income streams is a great idea. So is never settling in a position. You have to keep growing and learning new skill sets.
Enough of the feeling sorry for whom ever.
My wage in Gernmay in 1983 was $7.00/hr I made 35.000/year yes I worked 5000 hrs/year, 12 hr days,7 days a week,12 month/wear ocasionally I had days off.
(the cost of fuel was 1$/liter a row house was about $180K. $7.00 times 2080Hrs/year = $14560 ergo it took 12 year gross income to buy a row house in Germay.Today in Canada average $20.00/hr times 2080/hrs/year = 41600 times 12 = $499200. you get a row house in Calgary for about 240.000 thus Canadians today are better off than germans in the early 80’s.OK, I came in 1990 I made 21.50/hr yet my piers at sait only made about 9.00/hr anyways in 1995 I made $17.00/hr = about 34.000/year I bought a house $138.000 thus about 4 times gross income. Today journyman rate is 37/hr = 78.000/year times 4= 312.000 you can get the same entry level house for 312.000 therefore the cost of living or life is the same as it was allways wages went up with inflation.
STop painting a grim picture. There are always people who like to paint a grimm picture, thoose people tried to dicurage me already in the early 80’s. you want to loose listen to everybody else ,you want to win listen to you inner voice.
Get smart
I drive a Used VW TDI (paid for I paid $15000) I save $1000.00/20K compare to any other car in fuel cost.Thus I paid $15000 for a used car I drove so far 200000K (I’m dirving it still)I saved $10000 in fuel cost! I do not have an RV,what fore? Canadians do not have enough vacation to justefy a 30,40,50k purchase. I rent a hotel in osoyoos for $120/night for 9 night/year =1080.00 yet I saved the xttra cost of pulling and claning, storage and the monthly payments for an RV. The rest of my vacation I spend in Mexico (the caribien) like any other Canadian. sure there is exeptions, like a trip to Mexico but come on stuff you buy for daily living? If you do not have the cash do not buy it. it only takes a year to save up some money and pay for everything as you go.after all it is not any different to be a year behind. you do not make anymore money as you would if you save for it first.
If you can not pay off you Credit card by the Due date ,you could not affort it in the first pace.
I think sometimes young people don’t realize the amount of time, effort, discipline and sacrifice it takes to be wealthy. To be successful at anything, requires all of the above and a little bit of luck. Maybe with the luck, you can reach that point of success a little faster, but I think you can still eventually get there.
They just look at the end product and think oh I should be there already, just like that. It’s all about progression.
Reading all these pf blogs created by 20 and 30 somethings is proof that many of us are financially savvy and have the drive to succeed financially.