Oprah Winfrey gave great advice to the University of Southern California graduating class of 2018: “Eat breakfast…make your bed…recycle…pay your bills on time…and aim high.” And if you want to get real serious about your money, there are a few more things to keep in mind.
Helping Generation Z Achieve Financial Independence
The class of 2018 are part of Generation Z, which most would agree were born between 1995 and 2005, making them 13 to 23 years old, representing approximately 17.6% of Canada’s total population. The youngest Gen Zs will soon be starting high school, those in the middle have just graduated from high school, and the oldest are graduating from college and university and entering the workforce. Many of them are just entering the credit market as well, but to be fair, financial wellness should be a goal for all ages.
If you’re a member of Generation Z, here’s some advice for you. And if you’re the parent of a Gen Z teen, you may want to consider passing this along.
Keep Feeding the Piggy Bank
There’s no reason to stop putting loose change into a piggy bank as you get older. What’s great about this money is that we tend to forget about it and it really does add up. We’ve all heard the expression “save for a rainy day.” Whether that “rainy day” ends up being a light shower or a full-out monsoon, by putting money away little-by-little, know that you can be prepared for the unexpected.
Get that Part-Time Job
If you’re still in school, a part-time job cannot only offer some financial independence but also teach you financial responsibility. Of course, education should be your top priority, but if you’re able to pick up a part-time job or even just a side gig without it affecting your studies it’s a great way to begin saving. (Here we’ve compiled a list of ways to earn extra cash which might be an option for you depending on your age).
Avoid Credit Cards
Make a decision to live debt-free, and don’t get a credit card just because your friends have them. You want to be sure you can manage your money before you have to manage debt. A credit card doesn’t mean you have more money to spend; it’s just borrowed money that you’ll have to pay back eventually. If and when you do decide that you’re ready for a credit card, be sure to clear the balance every month. Then that deal you got on a new coat is the real deal—whereas if you don’t pay the balance in full you’ll end up paying interest on that purchase, so that “sale” item ends up costing you a lot more than you bargained for. Don’t believe me? Check out our Debt Calculator.
Be Careful Shopping Online
Online shopping can be dangerous, because it’s easier to tap a screen without really thinking about cost. But when you buy in store, you have more time to decide if you really need the item you’re buying. When you do shop online, be sure you know the true cost of your purchase, including taxes, shipping, and duties if you’re buying from an out-of-country supplier. Also check their return policy, and make sure their payment site is secure.
Pay Your Bills on Time
You heard it from Oprah. Paying bills on time every month is very important when it comes to establishing and maintaining a good credit rating. And this doesn’t just mean paying your credit card bills on time—you need to pay your cell phone bill, utilities, rent, etc. all on time too if you want to keep your credit rating and credit score up, otherwise your credit rating and score take a hit. (Don’t forget: You need to pay the bills a few days before the due date to allow time for the payment to be processed.)
Compare Expenses to Income
This exercise will help you determine how much money you can put into savings without leaving you strapped for cash when you need it. The younger you are, the more money you should be able to put away as you should have less expenses than someone older who’s living on their own or has kids. Want to take it one step further? Put these funds into a separate savings account or into a Tax Free Savings Account (TFSA) so they earn you extra dollars—plus, out of sight, out of mind. A good tip is not to attach this account to your debit card so the funds are harder to access.
Create a Spending Plan
Start budgeting so you’ll know exactly where every dollar goes, why, and how you can maximize every dollar you earn. You need to make a plan to spend because smart money management starts with a purpose; otherwise, what are you spending for? With good money management, you won’t need to dip into your savings, and you’ll be working towards a goal whatever it may be, whether it’s your next vacay, a new car, a weekend getaway, school or condo. And always think of ways you can save money. Can you stream a movie with friends at home instead of going to the theater? Do you need to buy coffee or lunch every day, or can you pack one? Do you need extra data on your phone when you already have data at home? Check out our Budget Calculator to help you identify areas in your budget where you can save.
Contact Credit Canada for free help putting a spending plan together
Millennials have already taken the lead in Canada when it comes to debt, so be sure not to follow in their footsteps. (You might want to download some budgeting and money-savings apps. We put together a list of them you can read about here.) Starting out with good financial habits means you won’t have to worry about dealing with bad debt habits down the road. You can set your financial goals at any age. Just decide what you want to achieve, make a plan and put it into action.