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5 Money Products You Should Have by Age 19

April 30, 2021
6 mins
A young woman sits on the floor working on her laptop while her big dog cuddles her legs

The COVID-19 pandemic has affected us all mentally, physically, and financially. As a result of the challenges, younger Canadians have started to focus on saving and planning for the future.

A national Ipsos survey conducted on behalf of Sun Life in January 2021 found that 80% of millennials (ages 24 to 39) want to protect their financial future more than ever because of the pandemic. For generation Z (ages 18 to 23), that number increased to 89%.

While focusing on saving for the future is traditionally more prevalent with older generations, there appears to be a shift in priorities.

Seventy-six percent of millennials and 81% of generation Z say the pandemic has made them want to focus more on their financial security. That compares to 61% of generation X (ages 40 to 55) and 55% of baby boomers (ages 56 and older).

There are several products you can use to improve your financial future. Let’s look at each one.

1. Chequing accounts

A chequing account is primarily for your day-to-day banking needs. You can pay bills, make debit transactions, send Interac e-Transfers, write cheques, and much more.

If you’re enrolled in a post-secondary institution, you can often get a student chequing account that offers unlimited transactions and no fees. If you’re not in school, it’s best to choose a no-fee chequing account. These are usually provided by online banks and have unlimited transactions. Some also offer an unlimited number of cheques for free.

2. High-interest savings accounts

There are savings accounts, and then there are high-interest savings accounts. If you haven’t guessed already, the high-interest version has a better rate than the typical savings account.

However, make sure that your financial institution offers a competitive interest rate. Many big banks have high-interest savings accounts with a low rate compared to their smaller competitors.

Look for an account that has practical features, such as unlimited transactions and no fees. Many banks offer savings accounts that may come with one free transaction a month and a fee for each additional transaction.

Putting money away in a high-interest savings account is a great way to build an emergency fund.

Typically, you can open a chequing or savings account at age 18, but a parent or guardian can open an account for you if you’re younger.

3. Credit cards

If used responsibly, credit cards are a great way to build a credit history and a credit score.

The key to using a credit card responsibly is to spend what you can afford on it and pay it off in full every month. Most credit cards charge an annual interest rate of around 19.99%. That can add up if you carry a balance on your card. The myth about carrying a balance on your card is good for your credit score is just that—a myth.

When you have a credit history and a good credit score, it opens a lot of opportunities in the future. With a good score, you can be approved for a car loan, be able to rent an apartment or condo, and qualify for a mortgage with a low rate.

You can get your own credit card when you turn 18 or reach the age of majority in your province or territory. If you have trouble getting approved for a student credit card, a secured credit card can help you work toward unsecured products.

Related read: Unsecured or Secured Credit Cards: What’s the Difference?

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4. Tax-free savings accounts

A tax-free savings account (TFSA) is more than just a savings account. The ones offered by your bank primarily hold either cash, mutual funds, or guaranteed investment certificates. However, a TFSA can also hold stocks, bonds, and exchange-traded funds (ETFs).

To hold various investments in one TFSA, you’ll need to get a self-directed version of this account at an online brokerage. This will allow you to choose your own investments.

If you’d rather have someone else make your investment decisions for you, you can open a TFSA with a robo-advisor. This is a low-cost alternative to most mutual funds offered by large financial institutions.

The advantage of having a TFSA is any interest income, capital gains, or dividends (except non-Canadian stocks) aren’t taxable. That means if the value of the investments held in a TFSA rise, you don’t have to pay any tax on any gains. And when you make withdrawals, you aren’t taxed either.

A TFSA can be used as a place to store your emergency fund, save for a vacation, or put away a nest egg for retirement. You get a set amount of annual contribution room starting at age 18. Currently, that’s $6,000 and any contribution room you don’t use carries forward indefinitely.

You can only open a TFSA when you reach the age of majority where you live. In Alberta, Manitoba, Ontario, Prince Edward Island, Quebec, and Saskatchewan, it’s 18. In the remaining provinces and territories, the age of majority is 19.

Even though you might not be able to open a TFSA until you turn 19, your contribution room still accumulates when you turn 18. Your contribution room will also accumulate after this time, whether you decide to open an account or not.

5. Registered retirement savings plans

A registered retirement savings plan (RRSP) is similar to a TFSA in that money invested within that account grows tax-free. However, you do have to pay tax when you make a withdrawal because it’s considered income. The only exceptions to that rule are if you participate in the Home Buyers’ Plan or Lifelong Learning Plan and repay the amount you withdrew when it’s due.

And like a TFSA, you can hold a variety of investments in an RRSP. The amount you can contribute is based on your income. You can contribute 18% of your previous year’s earned income plus any unused contribution room (which also carries forward, but only until age 71).

Contributing to an RRSP reduces your taxable income, whereas contributing to a TFSA does not. When you file your tax return and deduct an RRSP contribution, you can reduce your taxable income and potentially get a refund.

Now, RRSPs aren’t for everyone. If you’re in a low tax bracket, it’s often not worth contributing to an RRSP. In that case, you should contribute money to a TFSA instead. Once you reach a higher tax bracket, it will make more sense to contribute to an RRSP.

While there isn’t a minimum age you can get an RRSP, you must have earned income, filed a tax return reporting that income, and received a letter of consent from a parent or guardian to open an account.

Tips for saving

The best way to save money is to put your savings on autopilot. That means setting up regular weekly, biweekly, or monthly transactions to each savings account. This is better than attempting to save whatever’s left in your account at the end of the month.

Craig Sebastiano

Craig Sebastiano is an award-winning writer and editor with more than a decade of experience in journalism, marketing, and communications. He’s written about a number of financial topics, including investing, real estate, robo-advisors, mortgages, credit cards, pensions, taxes, insurance, RRSPs, and TFSAs. Craig’s work has appeared in MoneySense, Morningstar, Benefits Canada, Advisor’s Edge, Job Postings, and Ryerson University Magazine. He has completed the Canadian Securities Course and is an avid do-it-yourself investor.

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