5 Financial Tips For High School Graduates

Congratulations!  You’ve finally made it!  Another graduation season is wrapping up.  You’ve listened to an inspiring valedictorian speech, the caps have been tossed, and you’ve partied all night at prom.  Perhaps you’ve lined up a lucrative summer job and have been accepted at your chosen post-secondary educational institution.  There are exciting days ahead.

Related: The plight of generation Y

At 18 you are legally an adult in most provinces, with all the responsibilities that entails.

Take some time away from your summer activities to sort your finances.  Here are some tips to get you off to a good start.

Spend your graduation cash wisely

By all means, celebrate your achievements.  Allow a little splurge, but don’t blow it all.  Whether it’s a $100 cheque from Grandma or a portion of an inheritance, put that money to good use.

A U.S. study showed that the majority of graduating students used this money for college expenses or to boost their savings.

File a tax return

Even if your income for the year will be low, you should file a tax return in order to claim refundable tax credits, such as the GST credit.  You will also accumulate RRSP contribution room, which you can then use for a big tax deduction in the future.

If your earnings are below $25,000 you can use software like TurboTax for free to file your return.

Start a savings habit

Once you start working you need to constantly fight the temptation to spend every dollar you have access to.  It’s the perfect time to start saving for future goals.

Related: The beginner’s guide on how NOT to start investing

Start saving consistently with an automatic deduction plan.  Aim for 10% or more.  If that’s not affordable, you’re spending too much.  You may think you don’t have enough “extra” money yet, but if you are still living at home your expenses will be minimal.

Open an RRSP or TFSA, or both.  Take advantage of the twin forces of time and compounding that are on your side if you begin early.  You’ll become a savings superstar.

Don’t fall into bad money habits

Repeatedly wasting money on happy hours, concert tickets, clothes and fast food will eat into your earnings and cost you big time.  It’s not too soon to work out a budget and get clear on your goals.

Financially successful people live below their means.

Avoid credit card debt

High school graduates do not need a credit card.  You may start to get inundated with credit card offers.  They may have bonuses and gifts attached.  You may even get a card with your name on it and all you have to do is activate it.  Do not fall for this!

The temptation is great, but don’t fall into the trap of spending dollars you haven’t earned yet.  Once you start it can be hard to stop.

Final thoughts for parents

Your youngster has graduated from high school with all the required core courses, but they also need to learn good money management.

Editor’s note: Parents and students, this is a must read for new graduates – More Money for Beer and Textbooks – written by Kyle Prevost and Justin Bouchard from My University Money.

There can be a jarring lack of parental control when your high school graduate comes into some cash.  If you have a young grad in your life, share some of your best and worst financial moves.  Knowledge is based on a lifetime of experiences, something most high school students lack.

Related: Bailing out your adult children

The financial habits begun today will serve a young grad their entire lifetime.

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  1. Dan @ Our Big Fat Wallet on June 10, 2014 at 8:55 pm

    Great tips, I wish I would have listened to some of them when I graduated high school. At that point the most important thing in life was having a car to drive. Then came all the places we could go (and money that could be spent). I spent way more money than I ever should have on dining out and drinks

    • Boomer on June 11, 2014 at 1:20 pm

      I hear you Dan. I was almost the same way back when.

      It takes a lot of discipline to undo bad habits later on. Experience can be a great teacher, but it’s best to learn from others’ experiences.

  2. Diane on June 11, 2014 at 7:55 am

    My son has just turned 15. When he started shoveling driveways, caring for other people’s pets, raking leaves, etc., he was about 9. I have filed a tax return for him each year keeping detailed records of these earnings and he already has a good amount of room available for RRSP contributions. He has opened a trading account and has a few stocks. All kids understand McDonald’s or Disney. He has money in his bank account and can see how little this earns and he has stocks and can see how this changes in value too, sometimes up and sometimes down. While he has been learning, we still have some control. He already splits his earnings between saving (30%), charity (10%), and spending. It is never too early to learn these skills. Start before they turn 18, while you still have some control. That way, hopefully, some of this will already be habit.

    • KC on June 11, 2014 at 8:19 am

      Great advice as I plan to do this with my kids (when I have them).

      I remember that I had to beg my parents to open up a bank account when I was 12 but they didn’t really work with me on the saving/spending. Sometimes, I wish they did then perhaps the savings habit would have started earlier.

      • Boomer on June 11, 2014 at 1:28 pm

        @KC: I wonder why a lot of parents seem to think financial management is something their kids will figure out later on? Perhaps they are afraid they are too uninformed and don’t want to pass on their own bad habits.

        • KC on June 12, 2014 at 9:56 am

          I think part of the reason is that they think the school will teach the kids since this was how they learned about financial management.

          I do agree with you on them being afraid as well. I grew up watching them never having enough money to pay the bills, maxing out their credit card and loaning money to their manipulative parents (on mother’s side). Fortunately, they have managed to turn things around so I’m drawing on their experience to avoid (or try to avoid) getting into that situation.

    • Boomer on June 11, 2014 at 1:23 pm

      Hi Diane. It sounds like you’ve been doing an exceptional job in teaching your son financial responsibility and management over the years. I’m sure he’ll do well in the future.

      Sadly, I think you are very much in the minority.

  3. Kyle @ Young and Thrifty on June 12, 2014 at 8:06 pm

    Great List “Boomer”. Thanks very much for the shout out. I’m working hard to get the word out there about personal finance in schools. There is a curriculum floating around SW Saskatchewan that is being picked up by several school divisions. I think it’s the best hope I’ve seen for getting a true look at personal finance and investment options in schools.

    • Boomer on June 13, 2014 at 5:48 pm

      Thanks, Kyle. I’m very much in favour of unbiased financial education in schools.

      Going forward it seems to me that individuals will need to take greater responsibility for their future financial well-being. I see already that many adults approaching retirement are woefully unprepared and I can’t see it getting any better unless there is greater effort to promote this education.

      Good luck in your endeavours.

  4. Mike Strathdee on June 13, 2014 at 12:36 pm

    Lots of good stuff, here, but I wince at the “no credit card” suggestion. My daughter needs to get a credit card in order to get her cell phone transferred into a contract in her name. Used properly, this can be a useful tool. Put a small limit on it? Absolutely. But university students may need some access to credit, IMO

    • Boomer on June 13, 2014 at 5:55 pm

      Hi Mike: I will, reluctantly, concede that a credit card with a low limit may be appropriate in some cases, such as with your daughter – and you know your own child and how responsible she may be.

      Some will argue that this is the best age to start building a good credit history, but, in my experience, not many 18 year olds have the maturity to handle credit well and I can’t see that kids still living at home would need a credit card.

      It would not bother me if it turned out that I am mistaken, and I would be happy to be proven wrong.

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