As students head back to class, you may find yourself assisting with tricky math problems or reviewing essays, but are you able to confidently answer financial questions? If you answered “no”, you’re not alone. According to a 2021 survey, more than 2/3 of Canadian parents consider their household to have poor financial health, meaning that they may not pay bills on time, carry too much debt, don’t have short and long-term savings, or a financial plan.

Financial literacy is an essential part of building good money habits and can help prevent young adults from making mistakes they’ll be paying off for years to come. As the need for these competencies become more apparent, more provinces across Canada are including or improving their financial literacy requirements in schools. In Nova Scotia, financial literacy is said to be embedded into several subjects, including mathematics, social studies, and health education for students in elementary and junior high schools. In high school, the financial curriculum includes a compulsory financial mathematics course, with additional options to expand on financial literacy through courses in career development, family studies, economics, and entrepreneurship. While this is a drastic change from just ten years earlier, there is still much for youth to understand before taking on financial responsibilities of their own. Setting positive examples and enforcing these skills at home can help your children build on these healthy habits, while benefitting your household financial well-being simultaneously.

Budgeting

Building a budget is an easy way to take control of your finances and plan for your future. Whether that is setting specific spending limits or ensuring your essentials are covered and dividing the remainder between your savings and daily spending—creating a plan that works for you can help you get and stay ahead of your finances. Whether you already have a plan in place, or are just getting started, budgeting as a family is a good introduction to the world of money management. And if you have a teenager who will soon be heading out on their own, it can be a good idea to create a budget for them together.

When implementing a new budget, first consider where you want to be in 5, 10, or 20 years. Your budget should essentially be a blueprint of how you want to spend and save your money, in order to get to where you want to be. Whether your goal is to buy a house, save for school or retirement, build an emergency fund or all the above, create a plan that supports you achieving those goals while ensuring day-to-day bills and spending are covered. While you may need to make some changes to help get on the right track, it is important to set realistic expectations for yourself—you can still spend on non-essentials and entertainment if you work it in to your budget!

While each individual budget will look different based on your personal expenses and goals, CUA has created the following tools to help you get started:

• Budgeting Goals worksheet (PDF)

• Monthly Budgeting Sheet (PDF)

• Bi-weekly Budgeting Spreadsheet (XLSX)

A meeting with a financial advisor can also be helpful when implementing a new budget. Set up a free meeting with one of CUA’s advisors to help you get started.

Credit Cards

Credit cards can be a useful tool in managing your finances, but they can end up being one of the greatest causes of financial distress, especially for young adults who have recently gained the freedom to manage their own money. Having a credit card is a responsibility that needs to be properly managed, so that it does not put your financial health at risk.

As a young adult, your child may be tempted to sign up for multiple credit cards or select the first one they are offered, but there are other things to consider when selecting the right card. Between interest rates, annual fees, and perks like cash back or reward points—ensure you help your child select a card that is manageable and benefits them. Not sure where to start? Use our card picker to help find the perfect fit.

Beyond selecting the card, understanding interest rates and payment schedules is essential to making the most out of a credit card. It is best practice to always pay the full balance, on time each month. Paying the full balance eliminates the interest charges that are added when you don’t pay off the full balance. With most credit cards, you will be charged interest on your unpaid balance, which is then added to your outstanding balance. This means that if you don't pay off your balance in full the following month, you'll pay interest on your interest. This is how credit card balances can grow rapidly and sometimes get out of hand.

While the thought of your newly adult child taking on a credit card may seem daunting, it can be a great benefit when managed properly. Remember to select a card that benefits them, and encourage them to prioritize paying on time, pay more than the minimum each month, and create a budget and stick to it.

Saving & Investing

Investments can seem intimidating to those who aren’t familiar with the world of stocks and bonds but investing your money doesn’t always require a big risk to reap the benefits. You can use your own saving and investment strategy to talk to your kids about long-term goals and the importance of not spending all of your income.

If saving for either a long-term goal or something sooner, a Tax-Free Savings Account (TFSA) is a great option. You can contribute to a TFSA in a variety of ways, but in order to earn interest, an investment product like a Guaranteed Investment Certificate (GIC) needs to be held within the account. The benefit of a TFSA, as the name suggests, is that the interest earned on your contribution is non-taxable. This means that if you’re within your yearly contribution limit ($7,000 for 2024), you will not be required to pay income tax on those earned funds. Additionally, if you wish to withdrawal the funds from your TFSA, Canada Revenue Agency does not require you pay tax, unlike Registered Retirement Savings Plans (another great option, but we’ll get to that). It is important to note that a TFSA on its own doesn’t accumulate interest; it’s an investment vehicle used to house funds from a variety of sources, making income earned on the TFSA balance tax-free.

A Registered Retirement Savings Plan (RRSP) is a government-approved investment option that allows you to grow your money as you contribute over the years. RRSPs are designed primarily for retirement savings but can be accessed for certain long-term savings goals like home ownership. One of the benefits of this investment plan is that the amount of your contribution is reduced against your taxable income. For example, if you make $50,000 per annum, and contribute $3,000 to your RRSP, you will only pay taxes on the $47,000 not held within your RRSP. While this can be beneficial in cushioning your annual income tax payments, be aware that you will be required to pay tax on any withdrawal, whenever that may be.

It is also common that companies will offer RRSP matching as one of their compensation benefits, meaning they will match the amount you are contributing to your RRSP, up to a certain percentage, typically between 3-5%. While planning for retirement may seem far off, and unnecessary in the eyes of a teen earning their first paychecks, instilling the importance of saving for their future can help them get ahead now, and later in life.

Another great option for new investors is a GIC, which provides secure, worry-free investing for short- or long-term funds, with terms ranging from 30 days to 5 years, with both redeemable and non-redeemable options. GICs work similarly to a savings account, where you deposit funds and earn a guaranteed interest rate on those funds, which you can withdraw or reinvest upon maturity.

While TFSAs, RRSPs, and GICs are among the more popular, low-risk investments, there are many other options to choose from, with varying degrees of risk. Additionally, some investments have a minimum age requirement, making a regular savings account a good place to start with a younger child. You can help your child set a specific goal, whether that be to purchase a big-ticket item or save for a school trip. Encourage them to contribute by making small deposits as they are able – you may be surprised at how quickly they are able to achieve their goals! And while they may not realize it now, these skills are buildable and will give them an edge-up when in a position to begin saving for their adult future.  If you’d like to explore more options, connect with our team and we will help you, and your family, find the perfect fit.

Whether you are new to the financial literacy world or brushing up on your skills, hopefully you now have greater confidence in your ability to engage your children in these activities and model healthy financial habits at home.