3 Financial Planning Tips You Are Never Too Young To Learn!

November 1, 2016

I read an entertaining article the other day in The Australian called “Moralisers, we need you!”[1] The columnist raised some concerns about prioritization and budgeting amongst young adults, poking fun at a group of millennials he saw spending $22 for smashed avocado and feta on multigrain toast.

It can be difficult to put money aside for retirement when you are in your twenties and thirties. The goal can seem far away and many young adults are concerned with more immediate financial hurdles such as high housing costs and student-loan debt. However, twenty-two dollars a couple of times a week can go a long way in building a savings plan for retirement or towards a new home.

Here are 3 simple financial planning tips that individuals at every age should know:

  1. Wealth flows from savings, not income[2]

When I was young my father had me read The Wealthy Barber. The story follows a boy on his trip to Sarnia to see a barber, Roy, who has a knack for explaining basic financial planning concepts. At one point in the story, Roy states that he has met many professionals less wealthy then himself who earn significantly more. The reason: you can only get wealthy through accumulating assets and the only guaranteed way to accumulate assets is by saving. In other words, it’s what you save not what you earn.

  1. The sooner you start saving, the sooner you will be able to call work an ‘option’ rather than a ‘necessity’

Saving when you are young reduces your savings burden later on. The effect of compounding lowers the amount of principal that is required to reach your retirement goal. For example, if you were to invest $22 per month, beginning at age 20, at an annual rate of 5% your investment would be worth $33,572 when you turn 60. If you start investing at age 35 instead, that same $22 per month will only have grown to $13,101 at age 60 (assuming an annual rate of 5%). Therefore, beginning your savings plan early can significantly improve your lifestyle options when you are older and can provide you with greater budget flexibility later on.

  1. It’s better to have your money work for you, rather than you working for your money

By keeping your money in a bank account, or under your mattress, you will have little more than what you save. Inflation erodes your purchasing power, increasing what you are required to save over time. By investing your savings, your money will generate interest and/or capital gains on assets that appreciate in value which will help to combat inflation and lower the principal you require to reach your retirement goal. Reusing the earlier example, it is easier to earn $22 per month and invest it then it is to work for $33,572.

Balance is important whether you are approaching retirement or entering the workforce. It is easy to neglect financial discipline when you are young, however planning ahead can provide you with significant benefits later on. Develop a financial plan that works for you, save when you don’t have to and treat yourself on occasion. For some that may mean giving up spending $22 for smashed avocado and feta on multigrain toast.


[1] Bernard Salt, Moralisers, we need you! The Australian. theaustralian.com.au

[2] David Chilton, The Wealthy Barber. Canada: Financial Awareness Corp, 1989.


Devin Cattelan

Investment Advisor

Cattelan Private Wealth Counsel.