A Young Adult’s Smart Guide to Money

(What I wish I’d known at 18, 24, and 30 – from parents and grandparents who’ve been there, and a financial planner who can translate those experiences into actionable advice for today.)

If you’re in your late teens or twenties, you don’t need an “investment guy”, a six-figure income, or a meme stock or hot crypto tip. You need the right accounts, a simple investing approach, and habits you can automate. Do those three things well and future-you will thank you.

If you’re a parent or grandparent reading this, here’s your nudge: share this with your kids, then offer to sit beside them while they open an account and set up the first automatic transfer. Ten minutes today can pay a lifetime of dividends.

Step 1: Know your accounts

Think of accounts as containers. They aren’t investments themselves; they hold your cash or investments.

RRSP – Registered Retirement Savings Plan

• Contribution room is 18% of last year’s earned income, up to an annual limit.
• Room starts once you file an income tax return showing earned income. Unused room carries forward.
• Contributions reduce taxable income now; withdrawals are taxable later.
• Often best when your income is higher today than you expect in retirement, and for employer matches.

TFSA – Tax-Free Savings Account

• Room starts the year you turn 18 (19 to open in BC, NS, and NL).
• No deduction going in; growth and withdrawals are tax-free.
• Flexible. Great for short, medium, and long-term goals.

FHSA – First Home Savings Account

• Room starts when you open the account (not at age 18 by default like the TFSA).
• Contribute up to $8,000 per year, $40,000 lifetime. Unused annual room can carry forward once the account exists.
• Contributions are deductible; qualifying withdrawals for a first home are tax-free.
• If you don’t buy, transfer to an RRSP without using RRSP room.

RESP – Registered Education Savings Plan

• Room starts the year the child is born (year one for government grant eligibility), as long as the plan is opened and the child has a SIN.
• Grants add 20% on the first $2,500 contributed each year ($500 per year, $7,200 lifetime). You can catch up one prior year at a time, up to $1,000 of grant in a single year.
• Lifetime contribution limit is $50,000 per child.

Step 2: What goes inside the accounts

Cash is fine for near-term spending. For long-term goals, you need to invest.

Here’s the boring truth that has been proven over decades of research and evidence: low-cost, market-cap-weighted index funds will lead to the best outcomes for most people.

You don’t need to pick stocks or time the market. The simplest way is a single asset allocation ETF that holds a global mix of stocks and bonds and rebalances for you. Options from Vanguard, iShares, and BMO all work.

You’ll pay fees of less than 0.25% per year (mom and dad paid 2.5% per year for years on their mutual funds).

Rule of thumb: money needed within three years belongs in cash or GICs. Everything else can go into the ETF for longer term growth.

Step 3: How much should you save?

“Pay yourself first” is a great habit, but a flat 10% isn’t sacred. Fred Vettese’s Rule of 30 is more realistic: Save less for retirement when life is expensive (mortgage, daycare). Save more for retirement when income rises and temporary costs drop.

Start with a number you can reasonably afford. That might only be 1-5% in the early years, but stick with it, automate it, then increase it with every pay raise.

This smooths out consumption over your lifetime so that you’re never in a position where you’re depriving yourself while trying to save too much, or living in excess and abundance while saving too little.

Step 4: A simple order of operations

Assuming you are consumer debt free and have an appropriate emergency fund in place, here’s how to prioritize your extra cash flow, or “what’s next?” money:

1. Take the employer match if it exists
2. Contribute to your TFSA for flexibility and tax-free growth
3. Use your RRSP when your income is higher
4. Open and fund an FHSA if a home purchase within 15 years is realistic
5. Use a non-registered account only after you’ve maxed the above

RRSP vs TFSA rule of thumb: once your income reaches about $60,000 or more in most provinces, the RRSP deduction starts to become more attractive. Optimize your tax deduction by contributing just enough to bring taxable income down to the bottom of that higher bracket, then direct the rest to your TFSA.

Quick feel for the “bracket jump”:

• Alberta: around $60,000
• Ontario: mid-to-high $50,000s
• British Columbia: high $50,000s to about $60,000

National takeaway: below roughly $60,000, the TFSA usually wins on simplicity and flexibility; from about $60,000 and up, use the RRSP to trim income into the lower bracket, then keep building the TFSA.

If you’re starting to plow money into non-registered investments in your twenties, it may be a sign you’re saving more than you need to. It’s okay to enjoy life.

Step 5: Behaviour beats brilliance

Markets mostly go up, but they do go down from time-to-time. That uncertainty is the price you pay for good long-term returns.

Stay the course. The worst move is to panic-sell when things look bad.

Ignore FOMO and hot investment tips or schemes.

Costs, behaviour, and time do the heavy lifting. Boring works.

Your one-page cheat sheet

Do this next (young adult edition)

1. Open a TFSA (and an FHSA if a home is plausible within 15 years)
2. Choose a discount brokerage
3. Buy one asset allocation ETF that fits your risk level (VGRO/XGRO or VEQT/XEQT for growth; VBAL or XBAL for balance)
4. Automate a monthly contribution you can stick to
5. Leave it alone and increase with every raise

Do this next (parent/grandparent edition)

1. Forward this post to your young adult
2. Offer to sit with them while they open the account and set the first automatic transfer
3. If you’re helping financially, consider matching their first year of contributions (TFSA or FHSA) to build momentum
4. For future grandkids, set up an RESP and capture the grant

Who to follow and learn from

• Ben Felix (Common Sense Investing, Rational Reminder)
• David Chilton (The Wealthy Barber)
• Preet Banerjee (Instagram, YouTube, Globe and Mail)
• Jason Heath (Objective Financia Partners, Financial Post)
• Julia Chung (Spring Plans, FPAC)
• Sandi Martin (Sandi Martin Financial Planning)
• Anita Bruinsma (Clarity Personal Finance)
• Andrea Thompson (Modern Cents Planning)
• FP Collective (https://www.fpcollective.ca/)

Be wary of anyone promising quick riches, private deals with little disclosure, highly leveraged real estate plays, or other too-good-to-be-true strategies. Stick to regulated public markets and keep it simple.

Final Thoughts

If I could go back and talk to my 18-year-old self, I’d keep it simple: learn the accounts available to you, invest in the whole market at low cost, automate your savings, and ignore the noise. That’s it.

We’ve covered the buckets (RRSP, TFSA, FHSA, RESP), how and when room starts, what goes inside (cash for the short term, ETFs for the long term), how much to save (enough for now, more later as income increases and life gets easier), and the order of operations (employer match, TFSA, RRSP, FHSA, then non-registered). We’ve also covered the most important lesson: behaviour matters more than brilliance.

So here’s the takeaway. You don’t need a perfect plan to win with money. You just need to take the first step: open an account, make a small automatic contribution, and let time do the heavy lifting. Parents and grandparents, the best way to pass this wisdom along is to share this guide and sit down with your kids or grandkids as they make that first transfer.

It’s not about the dollars, it’s about the direction. The habits they start today can compound into financial independence tomorrow.