Being intelligent with money at a young age is imperative to ensuring an affluent future. Now more than ever, it is essential to educate young Canadians on financial matters. In a study conducted by Statistics Canada, it was discovered that only 67% of Canadians are financially literate (Correia & Wood, 2021). To direct parents of children in Gen Z (born in 1997 – 2015) to a more financially aware future, young people need to learn how to plan, have a positive cashflow rate, and to invest wisely.
Focus on planning instead of gambling. Planning involves constructive goals and being held accountable; meanwhile, gambling is short-term focused and relies on luck. If being prosperous in the future is something you value, plan for it. Wishful thinking is almost never lucrative. On the other hand, hard work, planning, and persistence are fundamental to success.
An essential part of planning is cashflow burn rate. Cashflow burn rate is a measure of your spending versus your income. For personal finances, concentrate on a positive burn rate (saving some of your income) and budgeting. Only 49% of people in Canada budget, and further, people who do not budget are 11% more likely to have a negative burn rate (“Canadians and their Money”, 2020). With a positive burn rate, you can begin to set money aside for your personal savings. (Consider a budgeting app such as mint.com)
Once you begin to save, focus on accumulating money through investments. We recommend a monthly contribution into a Balanced fund depending on your particular situation. In addition, you can invest through a TFSA to prevent taxation on any profit. Although investing can be as fun as it is lucrative, it is of course always important to keep your financial plan in mind. Don’t forget to set aside a portion of your capital for an emergency expense fund for any unexpected events the future may hold. (Consider an online bank such as www.tangerine.ca)
These three concepts are directed towards ensuring the success of the next generation. They can help young people fluidly transition into financially independent adults. With the proper planning, long-term focus, and money management skills, we can guide our young adults towards a financially literate future. If the young people in your life are ready to take these steps, contact us to help get them started.
Canadians and their Money: Key Findings from the 2019 Canadian Financial Capability Survey – Canada.ca. (2020). Retrieved 8 July 2021, from https://www.canada.ca/en/financial-consumer-agency/programs/research/canadian-financial-capability-survey-2019.html
Corley, T. (2021). 16 Rich Habits. Retrieved 12 July 2021, from https://www.success.com/16-rich-habits/
Correia, P., & Wood, C. (2021). Study: Financial Literacy vs. Financial Well-Being And Credit-Constrained Canadians | Loans Canada. Retrieved 8 July 2021, from https://loanscanada.ca/stats/study-financial-literacy-vs-financial-well-being-and-credit-constrained-canadians/
Lermitte, P. (2017). Decisions, Dollars & Sense. Vancouver, Canada: Paper Trail Publishing.