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Paying Yourself First

Category: Activities: Local | Age Group: 18+ (Transition years)

TOPIC:

The best way to set aside money

RESOURCES NEEDED:

A meeting with a bank agent to review options

LEARNING OPPORTUNITY:

As the young adult prepares to leave home, he or she needs to consider the importance of cash flow and how to best set aside money for future needs. Without giving thought to “how to pay yourself first,” there is a strong likelihood that any revenues will be spent without money having been set aside for future needs or contingencies. Therefore, it is important that time be spent prior to embarking on independent living to consider the options available for putting money aside – in other words, paying yourself first and then ensuring all other financial obligations are met.

THE ACTIVITY:
  • Find a moment to sit down with your son or daughter and ask them if they have made arrangements to manage their finances once they are on their own.
  • Ask them if they have ever heard of the concept of “paying yourself first.”
  • Establish a clear understanding that the term means setting aside money for future requirements prior to spending any available money.
  • Once this clarification has been established discuss with them 3 basic options for setting aside this money. This includes: a Savings Account, a Tax Free Savings Account (TFSA) and a Registered Retirement Savings Plan (RRSP) or Registered Education Savings Plan (RESP) if appropriate.
  • Explain to them that each has its merits and drawbacks and that they need to consider which would be best given their circumstances.
  • Briefly explain each to them (see websites below) and then suggest a visit to the bank (you may or may not wish to accompany them depending upon the circumstances) to discuss with a bank employee which option would be most appropriate given your son or daughter’s situation.
FOLLOW-UP IDEAS:
  • Accompany your son or daughter to the bank.
  • Once an option has been selected, do a hypothetical monthly budget with your son or daughter to see how much can be realistically set aside.
WEBSITES: