Financial Tips and Strategies for Canadian Millennials
Managing money as a millennial in Canada comes with unique challenges. Financial stability can feel out of reach amid a high cost of living, student debt, and an unpredictable job market.
However, with some simple, smart strategies, you can take control of your financial future. Here are some key financial tips and techniques tailored for Canadian millennials.
Budget Like a Pro
A budget is your financial blueprint. Track your income and expenses using an app (there are many!) or the built-in budgeting tools offered by banks like RBC and TD. Follow the 50/30/20 rule: 50 percent for needs; 30 percent for wants; and 20 percent for savings and debt repayment.
Pay Down Debt Strategically
Student loans, credit cards, and car loans can be overwhelming. To manage costs more effectively, focus on high-interest debt first (like credit cards) while making minimum payments on lower-interest debt. Consider consolidating loans or using a line of credit with a lower interest rate.
Maximize Your TFSA and RRSP
Take advantage of tax-sheltered investment accounts, including a TFSA and/or RRSP.
A Tax-Free Savings Account (TFSA) allows your money to grow tax-free, while a Registered Retirement Savings Plan (RRSP) gives you tax deductions now and defers taxes until withdrawal. Prioritize your TFSA for flexibility, and use your RRSP to reduce taxable income, especially if you're in a higher tax bracket.
Invest Early and Consistently
The best time to start investing was yesterday; the second best time is now. Whether it's stocks, ETFs, or mutual funds, compound growth works in your favor over time. For example, if you invest $5,000 when you’re 30, contribute $200/month, and assume a 3 percent interest rate, you’ll have almost $129,000 by the time you’re 60.1 That’s a nice chunk of change for retirement!
Build an Emergency Fund
Unexpected expenses happen, and to prepare for these unknowns, aim to save three to six months’ worth of living expenses in a high-interest savings account. This cushion can prevent having to rely on high-interest debt when emergencies arise.
Cut Unnecessary Expenses
Small savings add up. Cancel unused subscriptions, cook at home more often, and take advantage of coupons and loyalty discounts. Shopping secondhand and using cash-back apps also can help you save without major sacrifices.
Improve Your Credit Score
A strong credit score gives you more leverage when seeking mortgages or other loans, and even when renting an apartment. Pay your bills on time, keep your credit utilization low (below 30 percent), and avoid simultaneously applying for too many credit accounts.
Consider Homeownership Wisely
With Canada’s soaring real estate prices, home buying isn’t for everyone. The average home price in Canada in November 2024 was $646,134, with homes in many metro areas costing almost double that.2 Thus, it sometimes makes more financial sense to rent.
If homeownership is your goal, look into first-time homebuyer programs, like the First-Time Home Buyer Incentive and Home Buyers’ Plan (HBP), which let you use RRSP savings for a down payment.
Strategize for Retirement Now
Retirement may seem far off, but the earlier you start, the better. Even small contributions to your RRSP, TFSA, or employer-sponsored pension plan can make a huge difference over time. Take advantage of employer matching if available.
If Possible, Increase Your Income
Saving is important, but increasing your earning potential is also a great step. Consider side hustles, freelance work, or further education to boost your income. Websites like Upwork, Fiverr, and LinkedIn can help you find opportunities that fit your skills.
Financial stability is achievable with the right mindset and strategies. Budget wisely, invest early, and be intentional with your spending. The sooner you take control of your finances, the more freedom and security you'll have in the future.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.