If you are in your twenties and you feel like you are already behind, you are not imagining it. The starting line moved.
Rent takes a bigger bite of a first paycheque than it did for your parents. Tuition debt shows up before your first full-time job does. Entry-level wages have not kept pace with the cost of a place to live, and a house now costs a multiple of income that would have been unthinkable a generation ago. Those are real headwinds, and no amount of skipping coffee fixes them.
So let's not pretend they aren't there. This article is not going to tell you that you are bad with money. It's going to tell you about the one advantage you have right now that nobody older than you can buy back at any price.
The Headwinds Are Real. One Thing Didn't Change.
Costs went up. Wages lagged. Housing got harder. All true.
What did not change is compounding: the fact that money you invest earns a return, and then that return earns a return of its own, over and over, for as long as you leave it alone. Compounding does not care about the job market. It only cares about time.
And time is the one thing you currently have more of than every single person reading this who is older than you. It is the only item on the list you cannot go out and buy more of later.
Here is what that actually looks like. Same person, same $100 a month, same 6% average annual return. The only thing that changes is the age they start.
What One Year of Waiting Actually Costs
"I'll start next year" sounds harmless. It isn't free, and it's worth knowing the price before you agree to it.
Take the person who starts at 25 in the chart above. If they push it to 26 instead, same $100 a month, same assumptions, they end up with about $12,700 less at 65.
That reframes procrastination a little. Waiting is not neutral and it is not free: it is a purchase, and the price is paid by an older version of you who has fewer options.
The flip side is the good news. The amount is small. It's $100 a month, or $25 a week, or whatever you can actually manage. The size of the first deposit matters far less than the date on it.
Where the First $100 Actually Goes
Two steps, in this order. That's it.
Build a Launch Fund first
Most people call this an emergency fund, which makes it sound like it exists because something bad is coming. That's the wrong frame. This money is what lets you say no to a job you hate, yes to a move, or "I'll handle it" when the transmission goes. It is not fear money. It is freedom money, and it is what keeps you from having to sell your investments at the worst possible moment.
Start with $1,000 in a plain savings account you can reach in a day. Then build toward a few months of your actual expenses, whatever pace that takes. This money's job is to be boring and available, so it does not get invested in anything that can fall.
Then open a TFSA
Once the Launch Fund is started, the Tax-Free Savings Account is one of the accounts most commonly used by young Canadians. You can open one at 18 (19 in some provinces), your contribution room starts building from that age whether you use it or not, and every dollar of growth inside it is tax-free. Not tax-deferred. Tax-free.
The other thing that makes it the right first account at your age: you can take money out for any reason, and the room comes back the following year. You are not locking yourself into a decision your 24-year-old self has to live with forever.
One important point that trips people up. A TFSA is not an investment; it is a container. What you put inside it is a separate decision, and it should follow from what the money is for and when you need it. A TFSA holding cash and a TFSA holding a long-term growth portfolio are two very different things.
You Are Not Behind. You Are Early.
The conditions you are starting in are harder than the ones your parents started in. Both things can be true: the headwinds are real, and you still hold the single most valuable asset in this entire conversation.
You do not need a big income, a finished plan, or a perfect month to begin. You need an account and a date. The rest gets easier from there, and you can adjust everything else as your life takes shape.
If you're considering getting started, now may be a good time to explore the available options and determine which account best aligns with your goals and circumstances. Heidi or a member of her team can help you understand the available options and discuss an investment approach that may be appropriate for your goals, time horizon and personal circumstances.
How to help without taking the wheel
You are watching your kid start out into conditions that are genuinely harder than the ones you started in, and you want to help without turning every conversation into a lecture. Here is what tends to work.
- Match instead of give. Offering to match what they put into a TFSA, dollar for dollar up to whatever you can manage, rewards the habit rather than replacing it. They still have to do the saving.
- Let them own the account. If you open it, fund it and manage it, they learn nothing except that you'll handle it. The point is that they build the muscle while the stakes are small.
- Send the tool, not the lecture. Forwarding this article, video included, gives them something to react to on their own time, which lands very differently than a conversation at the dinner table.
- Don't fund it out of your own retirement. This one matters. There are loans for their goals; there are none for yours. Helping should never come out of the plan that keeps you independent later.
If you would like to talk through how much help is the right amount of help, without putting your own plan at risk, book a conversation with Heidi. That's a question worth answering properly.
Mutual funds are offered through Investia Financial Services Inc.
Insurance solutions provided in Ontario and New Brunswick, through Heidi Blondin Financial / Qualified Financial Services.
The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This article was prepared by Heidi Blondin who is a Certified Financial Planner (CFP) at Heidi Blondin Financial a registered trade name with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this presentation comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability.