Financial management tips and strategies for young adults (2024)

Financial literacy


Broadening awareness and skills to achieve successful financial independence.

From an early age, learning the basics of money smarts can go a long way in positively setting the stage for informed and proactive financial decision-making. As individuals advance through their youth, these skills take on a heightened level of importance as responsibilities and exposure increase. This holds especially true for those who are currently attending or have recently graduated from post-secondary institutions, as this is a time when many individuals typically experience a major shift into greater financial independence. When you consider that over one million young adults are attending universities across Canada in the 2016–2017 academic year, and 300,000 will graduate and enter the workforce in 2017,1 it’s clear how crucial financial management skills are among this demographic and into early adulthood. Add to that the fact that today’s young adults will be the main receivers of what’s being labelled the largest wealth transfer in history over the coming decades, and financial literacy takes on an immense level of importance during this period of change.

Today’s young adults—a financial snapshot

For individuals and families who have reached a life stage where they’re beginning to think about and plan for transferring wealth to their children and/or grandchildren, there may be an element of concern among some in doing so. The source of these worries is generally rooted in two things: not knowing if their younger family members possess the financial responsibility needed to manage the funds in appropriate ways, and whether passing wealth down in this way will encourage a sense of entitlement among the younger generation and discourage their motivation to actively build their own financial resources.

While personal situation and an individual’s habits and level of responsibility should always play a key role in determining readiness, some statistics indicate that many young adults these days are prioritizing financial planning and do share many of the same goals as their parents’ generation. For example, according to a recent poll of young Canadians, 49 percent want to own a home and 48 percent want to make reducing or eliminating debt through regular payments a priority.2 At the same time, however, the younger generation seems to be struggling to balance short-term and long-term saving.3 Part of this challenge among today’s youth arises from the fact that the economic and social landscape is different than it has been in generations past. The job market is tougher with more part-time, temporary and contract employment; both tuition and housing costs have substantially increased and continue to rise; and divorce is more common, which has created more complicated family situations — it’s factors such as these that make financial planning increasingly complex for youth. But while there are a number of competing priorities and aspects to consider, what it comes down to is helping young adults bridge the gap between identifying what their goals are and should be and putting appropriate plans in place to attain them in today’s social and economic climate.

Financial literacy at community and institutional levels

In recent years, the promotion of financial literacy has come to the forefront across the country, focusing on Canadians of all ages, and specifically youth and younger generations. It was 2011 when the Financial Literacy Action Group (a coalition of non-profit organizations that raises awareness and highlights programs and services to help Canadians improve their financial knowledge and skills) organized the first Financial Literacy Month, which takes place every November.4 In the first year, there were 200 events and that number expanded to 1,266 workshops, seminars and events in 2014, taking place in every province and territory in Canada.5 And since that time, the number of initiatives has continued to grow.

Outside of the recognized month of November, there are a range of initiatives and organizations devoted to supporting financial literacy and the development of strong financial management skills. The Financial Consumer Agency of Canada has centralized much of this information through its Canadian Financial Literacy Database, which provides a comprehensive and expansive tool to help individuals search for resources, information and events on a wide range of financial topics from various Canadian organizations. The database also zeroes in on specific demographics, including students, youth and young adults and also provides links to over 125 different financial education providers that support the National Strategy for Financial Literacy, Count me in, Canada.6

Building financial skills during the post-secondary years

For Canadian youth, finances and work are often main stressors in thinking about the future. In a recent poll, it was found that among Canadians aged 18 to 24, 63 percent have been negatively impacted by the cost of post-secondary education, 59 percent are struggling with the cost of housing in their community, 50 percent feel negative about the availability of good-paying jobs in their field, and 53 percent are challenged by the amount of debt they have.7 It’s important to recognize, however, that for some, these concerns may stem from a lack of financial knowledge and understanding of how to strategize in order to offset or plan for these potential challenges. Among this age group, the following outlines some important areas of focus.

6 key tips for post-secondary students and recent grads

  • Build and use monthly budgets. Establishing your budget should involve tracking all of your day-to-day expenses, as well as your school costs from housing to groceries to transportation to textbooks. From there, it’s important to be conservative with how expenses add up in relation to income, and then make adjustments as needed.
  • Understand credit and credit score. A credit card can be a valuable tool, but it can also be a source of great financial stress if not used appropriately. Do research to find out about fees, limits and interest rates, and how spending and payment behaviour impacts your credit rating.
  • Recognize some important things to look for in a first-time job, beyond salary. Many employers offer a range of programs and initiatives to help promote a positive work culture, employee engagement and retention, and to support their employees in saving for the future. When applying for or accepting a new position of employment, some key financial aspects to understand are the benefits package and terms, whether the company offers a pension plan and which type it is (a defined benefit plan or a defined contribution plan); if there’s an employer-sponsored group RRSP plan, or if they reimburse professional development courses or association memberships that will help you advance in your role and career.
  • Focus on saving. Incorporating it into your budget is an effective way to generate and grow your savings. A good starting point is to direct three to 10 percent of your paycheque to a savings program. Part and parcel of this should also be understanding the difference between an RRSP and a TFSA and the potential benefits of each.
  • Develop a process for managing your bills and accounts. Even in a highly digital age when you can arrange for automatic payments and many accounts exist online, it’s important to keep track and check these regularly.
  • Know and make the most of available tax-planning strategies and credits for students. A useful checklist can be found in the Spring 2016 edition of Perspectives.

Addressing the full financial picture in early adulthood

Many in this demographic will agree that this stage typically brings with it a number of life and financial changes, often including marriage, home ownership, starting a career, and having kids. Understandably then, this can also mark a point in life where planning becomes more complex given these growing factors to account for. And while 2014 statistics indicated that 50 percent of young adults were contributing to an RRSP (which was the highest level in five years)8—a promising indication that there’s heightened awareness as to the importance of long-term saving at this stage—that still means half of young Canadians may be uninformed about the benefits of RRSPs or are potentially prioritizing other more immediate goals. Within this demographic, the following outlines some key areas of focus to develop a balance between planning for the here and now versus the future.

5 main considerations for 20-somethings

  • Identifying short- and long-term goals. A simple approach is to think about and itemize objectives at five-year, 10-year and 20-year intervals, for example. Noting them concretely can be a great starting point for conversations with a professional advisor to then put the right planning and investment strategies in place.
  • Having a suitable emergency fund. As a rule of thumb, for an individual this should be roughly three times your monthly expenses, and for a couple or those with kids, it should be six times your monthly expenses.
  • Developing a basic knowledge of both registered and non-registered investment options and the purposes of each type. Part of this should include an understanding of the tax-sheltering advantages associated with registered programs, and the potential benefits of non-registered accounts for shorter-term goals. Again here, the knowledge and assistance of a professional advisor can be very useful in this regard to cater solutions to your particular circ*mstances.
  • Being disciplined in paying down any debt and eliminating debt with the highest interest rates first. It’s also important to understand the importance of making payments on time and paying more than the minimum amount, if possible, in relation to credit rating.
  • Rethinking spending as part of your overall budget. This may include items such as buying lunch every day, coffee and transportation choices. Even small adjustments in areas such as these can add up over the course of the year, and may equate to savings that could be directed to an RRSP or TFSA, for example.

Among the range of resources, news and articles that cover the topic of financial literacy among the younger generation, it’s evident there are a variety of views and opinions as to how informed late teens and young adults are in regards to financial management and planning, as well as their readiness to effectively take on financial independence. But regardless of what school of thought you belong to, the key point to recognize is that developing these types of skills is becoming — and needs to remain — a priority. It’s about ensuring our youth have access to appropriate and timely resources and that relevant learning opportunities and tools are embedded throughout various aspects of their lives, whether that’s schooling, community programs, family mentoring or organizational initiatives.

For additional information on important aspects to consider at a variety of life stages, please view the RBC Wealth Management Canada Special Report, “Five key questions to consider in wealth planning”.

RBC Wealth Management is a business segment of Royal Bank of Canada. Please click the “Legal” link at the bottom of this page for further information on the entities that are member companies of RBC Wealth Management. The content in this publication is provided for general information only and is not intended to provide any advice or endorse/recommend the content contained in the publication.

® / ™ Trademark(s) of Royal Bank of Canada. Used under licence. © Royal Bank of Canada 2024. All rights reserved.

Let’s connect

We want to talk about your financial future.

Let us contact you

Related articles

Financial advice from our women leaders to the next generation

Financial literacy7 minute read- Financial advice from our women leaders to the next generation

Building financial literacy among the younger generations

Financial literacy6 minute read- Building financial literacy among the younger generations

Financial planning tips for millennials

Financial literacy8 minute read- Financial planning tips for millennials

Browse all insights

As a seasoned financial expert with a deep understanding of the intricacies of financial literacy, I am here to provide valuable insights into the article on "Financial Literacy Insights: Broadening awareness and skills to achieve successful financial independence." My extensive experience in the field allows me to shed light on the concepts discussed in the article, offering a comprehensive perspective.

The article emphasizes the critical role of financial literacy from an early age, highlighting its impact on informed and proactive financial decision-making. For young adults, especially those attending or recently graduated from post-secondary institutions, the transition into greater financial independence becomes a pivotal period. With over one million young adults in Canada attending universities in the 2016–2017 academic year, the need for robust financial management skills becomes evident.

The demographic shift into financial independence is crucial, considering that today's young adults are expected to be the primary recipients of the largest wealth transfer in history. However, concerns arise among those planning to transfer wealth to their younger family members. These concerns stem from uncertainties about the younger generation's financial responsibility and the potential for creating a sense of entitlement.

Despite these concerns, statistics indicate that many young adults are prioritizing financial planning. A recent poll shows that 49 percent aspire to own a home, and 48 percent prioritize reducing or eliminating debt through regular payments. Nevertheless, challenges arise as today's youth grapple with a different economic and social landscape, marked by a tougher job market, increased tuition and housing costs, and more complex family situations due to common divorces.

To bridge the gap between identifying goals and implementing plans in today's dynamic environment, the article discusses the importance of financial literacy at both community and institutional levels. Initiatives such as Financial Literacy Month, organized by the Financial Literacy Action Group, have gained prominence, offering a platform for awareness and education across all age groups, with a specific focus on youth.

The Financial Consumer Agency of Canada plays a pivotal role in centralizing information through the Canadian Financial Literacy Database. This database serves as a comprehensive tool, enabling individuals to search for resources, information, and events related to various financial topics. It also caters to specific demographics, including students, youth, and young adults.

The article delves into the financial challenges faced by Canadian youth, particularly those in post-secondary education. A significant portion of these challenges may arise from a lack of financial knowledge. To address these concerns, the article provides six key tips for post-secondary students and recent grads:

  1. Build and use monthly budgets.
  2. Understand credit and credit score.
  3. Recognize important aspects of a first-time job beyond salary.
  4. Focus on saving and understand the difference between RRSP and TFSA.
  5. Develop a process for managing bills and accounts.
  6. Know and make the most of available tax-planning strategies and credits for students.

Moving beyond the post-secondary years, the article discusses the broader financial picture in early adulthood. Key considerations for individuals in their 20s include:

  1. Identifying short- and long-term goals.
  2. Establishing a suitable emergency fund.
  3. Developing basic knowledge of registered and non-registered investment options.
  4. Being disciplined in paying down debt.
  5. Rethinking spending as part of the overall budget.

The article concludes by emphasizing the importance of financial literacy across various life stages and the need for continuous access to relevant resources and learning opportunities. In an ever-evolving financial landscape, developing financial skills remains a priority for ensuring the youth's successful financial future.

Financial management tips and strategies for young adults (2024)


Top Articles
Latest Posts
Article information

Author: Msgr. Benton Quitzon

Last Updated:

Views: 5521

Rating: 4.2 / 5 (43 voted)

Reviews: 82% of readers found this page helpful

Author information

Name: Msgr. Benton Quitzon

Birthday: 2001-08-13

Address: 96487 Kris Cliff, Teresiafurt, WI 95201

Phone: +9418513585781

Job: Senior Designer

Hobby: Calligraphy, Rowing, Vacation, Geocaching, Web surfing, Electronics, Electronics

Introduction: My name is Msgr. Benton Quitzon, I am a comfortable, charming, thankful, happy, adventurous, handsome, precious person who loves writing and wants to share my knowledge and understanding with you.