Join millions of Canadians who have already trusted Loans Canada
Apply Now

Young people often enter adulthood without getting very much helpful financial advice. There are a lot of pitfalls that can trap a young adult. Avoiding these mistakes can make a huge difference in a young person’s financial security.

Investing too much in a house or condo.

There’s a great temptation, when buying a first home, to stretch to buy the nicest home with the highest payments that can possibly be made each month. If a young person has managed to save a small nest egg, it should not all be used to make a down payment. Being over-invested in a home can make it terribly hard to deal with situations that may arise, such as the need to move quickly to another region, or an unexpected job loss or family illness.

Ignoring the need to save for retirement.

It’s common for young people to think of retirement as being very far away, and to view retirement savings as something they can think about later. On the contrary, it’s important to start saving at least a small amount regularly. Young adults should take full advantage of any savings plans offered by their employer, such as an RRSP.

Not having a budget.

If you don’t have a budget, you are going to be surprised again and again by your account balance at the end of the month. Setting up a budget really helps to plan out how much you need to set aside for different categories of spending. You will have a much better idea of how much you can afford for new expenses, such as a mortgage or car payment.

Using credit cards too freely.

Too many young adults are tempted by the many credit card offers they receive. They may start spending a lot on one or more cards, thinking, “Oh, I’ll pay this off when I get my raise.” This can be a slippery slope into massive debt with high interest rates and should be avoided. View your credit cards as a convenient payment method, and pay off the total balance every month. Avoid these other mistakes as well.

Trying to get by without health insurance.

Young adults feel that nothing bad will happen to them. Some give in to the temptation to skip having any health insurance. This is a terribly dangerous gamble to take. Young people can and do get sick and have serious accidents; big debts to hospitals and doctors can follow a young person for decades and ruin the chance to save money and get ahead financially.

Not having an emergency fund.

Spending right up to the limit is an unwise choice that a surprising number of young people make. With no emergency fund of liquid cash set aside, a young adult may have no option in a crisis other than to borrow money at high interest rates from credit cards or short-term loan companies.

Going deeply into debt for college costs.

While it seems that everyone goes into debt for college, that doesn’t make it a wise plan of action. Young people may graduate and have a hard time finding a job that pays enough to allow them to make payments on their student loans. Students should absolutely minimize the amount of education debt that they incur.

Paying monthly for a high rent apartment.

It’s natural to want to live in the nicest place that you can possibly pay for each month. Young people make the mistake of stretching their finances so far on rent payments, that there’s no money left over each month for anything else. Then they can’t save enough to buy a home, or deal with a financial emergency. They may be stuck in a circular financial pattern where they are never really able to move upwards.

Not saving money every month.

If you aren’t saving some money each month, you really have to make a fundamental change in your spending ASAP. As soon as you reduce that spending, or work a few extra hours to achieve a higher cash flow, consider setting up at least a small automatic monthly transfer from your checking account into a savings account.

Having high car loan payments.

Car loan payments cause many young people to be unable to “get their heads above water” financially. A car is an asset whose value starts to go down the day the car is purchased. Young adults who go out on a limb to make big payments on a new or nearly-new car are often left a few years later with a car that’s worth very little and needs expensive repairs. On top of that, they’re left having to make payments on the car loan. It’s a bad equation all around, and young people should do everything possible to avoid car loans and buy a pre-owned car for cash. Note also how your debt affects your credit score.

Caitlin Wood avatar on Loans Canada
Caitlin Wood

Caitlin Wood is the Editor-in-Chief at Loans Canada and specializes in personal finance. She is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. Caitlin has covered various subjects such as debt, credit, and loans. Her work has been published on Zoocasa, GoDaddy, and deBanked. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security.

More From This Author

Special Offers

More From Our Experts
Fido Refer-A-Friend Program

By Lisa Rennie
Published on June 1, 2023

The Fido Refer-A-Friend program is unique. You can earn up to 5 free months of Fido cell service EVERY year. That is almost 50% off your bill.
Assessed Value vs. Market Value: How Does It Affect Your Home Equity?

By Mortgage Maestro

How do assessed value and market value differ? Find out how your market value and assessed value affects your home equity?
How To Borrow Using Your Home Equity In 2023

By Lisa Rennie

Do you have equity in your home? Find out how you can get a home equity loan in Canada and how much you can borrow.
Keepa – Amazon Price Tracker

By Bryan Daly

If you want to shop or sell on Amazon, you need to know about Keepa. Keepa is a browser extension that tracks Amazon prices and
Should You Get a Loan for a Used Car?

By Bryan Daly

Used cars loan can help you purchase a car even if you can’t pay it outright. The question is, should you get a loan for a used car?
Best Credit Cards For Low Income Earners 2023

By Lisa Rennie

If you're worried about qualifying for a credit card because you have a low income, check out these credit cards for low income requirements and great...
Why Did You Recieve A Credit Memo In Canada?

By Bryan Daly

Have you ever received a credit memo in Canada? Wondering why you got it? If you’ve ever returned a product, you may receive a credit memo instead of ...
What Do You Need To Borrow Money In Canada?

By Lisa Rennie

When you need to borrow money, there are many options to choose from. But finding the right option can be hard. Let's find out which one is right for ...

Recognized As One Of Canada's Top Growing Companies

Loans Canada, the country's original loan comparison platform, is proud to be recognized as one of Canada's fastest growing companies by The Globe and Mail!

Read More

Why choose Loans Canada?

Apply Once &
Get Multiple Offers
Save Time
And Money
Get Your Free
Credit Score
Expert Tips
And Advice

Build Credit For Just $10/Month

With KOHO's prepaid card you can build a better credit score for just $10/month.

Koho Prepaid Credit Card