In mid-2019, the total debt held by Millennials in Canada climbed above half a trillion dollars to $515.9 billion, up 12.3% from mid-2018 according to a recent TransUnion report.
Aside from being a huge number, this figure – and the rapid year-on-year increase – is worrying given that Millennials report having relatively low financial literacy. According to a PWC report, 24% of Millennials indicate having only a basic level of financial literacy while only 8% rate their financial literacy as high.
Why does this matter? Because adopting bad financial habits at an early age can have long-lasting negative consequences, from falling into a long-term debt trap to missing out on valuable long-term benefits.
The good news is that if you’re a Millennial, there’s plenty that you can do now to put yourself on track for better financial outcomes, even if you owe a good chunk of that half-a-trillion debt.
Small steps toward large goals
When it comes to your finances, little things can add up to a big impact – especially when time is on your side. Here are several financial tools and strategies that you can use to make relatively small changes with the potential for large payoffs:
- Keep your debt to a minimum. If you have student loans, it may take you 9–15 years to pay them off according to data from the Canada Student Loans Program. While you can’t avoid this, you can do yourself a huge favour by not going further into debt. Opting for a used car rather than a new one and paying off your credit card bill in full each month will help you maintain a healthier financial position.
- Power up your savings. If you set aside some savings each month after covering all your essentials, you’re already on the right track. However, this money won’t grow much in a simple savings account. By depositing these funds in a registered investment account such as a tax-free savings account (TFSA) or registered retirement savings plan (RRSP), you can use time and tax advantages to help your money grow.
- Safeguard your financial well-being. When you’re young and healthy, it’s easy to feel invincible. Yet the sad reality is that many young people still suffer major accidents and illnesses each year. With disability and critical illness insurance, you can protect your financial well-being. If an injury or illness leaves you unable to work, this insurance can help you focus on recovery rather than how to pay your bills.
- Protect your loved ones while investing wisely. Life insurance is a powerful tool for ensuring your loved ones will be protected financially when you’re no longer around while also providing you with valuable opportunities for tax-efficient investing. And because premiums are based on your age and health, the earlier you obtain coverage, the lower your premiums will be.
Personalized approach, rewarding outcomes
From finances to musical tastes to how you like your coffee, everyone is unique. Nonetheless, there are various financial milestones that many Millennials will likely face at some point in their 20s and 30s – for example, starting a new career, paying off student debt, getting married, and saving up for or buying a first home.
Regardless of where you are in your journey, boosting your financial literacy and implementing sound financial practices can help bring you closer to your goals. To discuss your path to a brighter future, contact Rubach Wealth at (647) 349-7070.