Financial Planning for New Graduates
Just finished school? Start your financial life right with this guide covering student loan repayment, building credit, emergency funds, TFSA vs RRSP for low earners, and budgeting basics.
Congratulations on finishing school! The financial habits you build in your first few years of working will compound for decades. Start with three priorities: build a small emergency fund ($1,000-$2,000), make minimum payments on all debts, and open a TFSA. Even $50 per month into a TFSA invested in a low-cost index ETF will establish the habit of paying yourself first.
If you have student loans, understand the interest rules. Federal student loans accrue interest at the prime rate. Provincial loans vary. Student loan interest is eligible for a 15% federal tax credit. There is no mathematical rush to pay off low-interest student debt if you can earn a higher return by investing, but the psychological benefit of being debt-free has real value. A balanced approach: pay at least 20% more than the minimum while directing remaining savings to your TFSA.
Build your credit score early. Get a no-fee credit card, use it for regular purchases, and pay the full balance every month. Your credit score affects your ability to rent an apartment, get a car loan, and eventually qualify for a mortgage. At this life stage, a TFSA is almost always better than an RRSP because your marginal tax rate is likely at its lowest point — save RRSP room for when your income (and tax rate) is higher. Set up automatic transfers on payday so saving happens before spending.