Financial Literacy 101: What Every Young Canadian Should Know About Money

Money is power, but only if you know how to use it.

For many young Canadians, financial literacy wasn’t a core subject in school. Yet, understanding how money works is one of the most important life skills you can have. Whether you’re saving for your first apartment, planning a trip, or thinking about investing, building strong financial habits early can set you up for a lifetime of financial freedom (and way less stress).

This guide breaks down what every young Canadian should know about managing their money. Let’s get into it!

Budgeting: The Foundation of Financial Success

A budget isn't about restrictions, it’s about giving yourself control.

Why you need a budget:

Helps you see where your money is going.
Ensures you have enough for needs, wants, and savings.
Stops you from living paycheck to paycheck.

How to create a simple budget:

Track your income and expenses for a month.
Use the 50/30/20 rule:
- 50% of your income for needs (rent, bills, groceries).
- 30% for wants (dining out, entertainment, shopping).
- 20% for savings and debt repayment.
Adjust as needed. The point is to make your money work for you.

Pro tip: Use a personal finance platform like Zyaade to make tracking your expenses easier.

Saving: Pay Yourself First

Building savings isn’t just for emergencies, it’s about giving yourself options.

Where to keep your savings:

Open a high-interest savings account to grow your money faster.
Look into Tax-Free Savings Accounts (TFSAs): you earn interest, dividends, or capital gains without paying taxes on them.
Consider a Registered Retirement Savings Plan (RRSP) for long-term savings (bonus: it lowers your taxable income).

Savings hacks for young Canadians:

Set up automatic transfers to your savings every payday and treat it like a bill.
Use a no-fee online bank like Tangerine, EQ Bank, or Simplii Financial to avoid unnecessary monthly charges.
You can create different savings accounts for different priorities. If you are saving for a trip, create a travel savings account. Ensure you have an emergency fund that is separate from your other savings accounts.

Goal: Aim for 3-6 months’ worth of living expenses in an emergency fund.

Understanding Debt (And How to Manage It)

Not all debt is bad, but knowing the difference is key.

Good debt:

Student loans, mortgages, and investing in your education or career.

Bad debt:

Credit card debt, payday loans, and anything with sky-high interest rates.

Tips to stay in control of debt:

Pay off high-interest debt first (like credit cards).
Make more than the minimum payment, even an extra $20 a month can make a big difference.
Avoid borrowing for things that lose value quickly (like new gadgets or clothes).

Pro tip: Avoid afterpay options like Klarna and Affirm even if they offer zero interest. Don’t spend what you can't afford on things you don’t actually need.

Investing: Grow Your Money (Even If You’re a Beginner)

Investing isn’t just for wealthy people, the earlier you start, the more your money can grow.

Investment basics for Canadians:

Start with a TFSA, you can invest in stocks, bonds, ETFs, and mutual funds while your earnings grow tax-free.
Consider platforms like Wealthsimple if you’re new to investing, they have an account where they build and manage your portfolio for you.
Learn about compound interest. Your money earns interest, and that interest earns interest. Over time, this can lead to massive growth.

Rule of thumb: Invest for the long term, don’t panic when markets go up and down. Prioritize putting your money in low-risk investments like dividends and avoid jumping on “get rich quick” trends.

Credit Scores: Why They Matter and How to Build Yours

In Canada, your credit score affects your ability to rent an apartment, get a car loan, or even secure a good phone plan.

How to build and maintain good credit:

Get a no-fee credit card and use it for small, regular purchases (like groceries or streaming services).
Pay your balance in full every month.
Don’t use more than 30% of your available credit, this helps keep your utilization rate low.

Why it matters: A high credit score gets you lower interest rates and better financial opportunities.

Taxes: What Every Young Canadian Should Know

Key tax tips:

File your taxes on time and search for supports to help you do your own taxes. The Canada Revenue Agency (CRA) has a list of free tax clinics.
Take advantage of tax credits and deductions:
- Tuition and education credits.
- Moving expenses (if you moved for school or work).
- Charitable donations and medical expenses.
If you have a side hustle or freelance income, set aside a portion for taxes and don’t get caught off-guard.

Pro tip: Use free tax software like Wealthsimple Tax or TurboTax to make filing quick and easy.

Build Lasting Financial Habits

Create money routines:

Check your expenses and budget on a set routine.
Set monthly financial goals (like saving $100 or paying off a portion of debt).
Do a money "audit" every few months to see if you are on track? Do you need to adjust your budget or savings?

Why this works: Financial freedom isn’t built overnight, it’s the result of small, consistent actions.

Ready to take control of your finances?

Try our personal finance platform, designed for those who want to make money management engaging and effortless.