Millennials are saving for different financial goals and life milestones. As millennials move into different stages of their lives, they will be dealing with a completely new set of priorities—how to approach buying a home, managing money as a married couple, and raising their own children. Of course, these experiences as a millennial can be quite different than they were for, say, the baby boomer generation. It may come down to a matter of managing expectations—but whatever change is on the horizon, it’s important for millennials to be financially prepared to roll with the punches.
Millennials should pay off debt as they save for specific financial goals
A 2017 BMO Wealth Management Report revealed that millennials are serious about saving money; in fact, over 70% of those surveyed said that they were saving for a specific purpose, such as buying a house. While this is a great first step, it’s also important for millennials to consider just how much they will need to save in order to successfully take on these new commitments.
If you’re a millennial, you’ll want to work on decreasing your debt now, before these changes occur. You’ll find a wealth of tips and ideas in our guide, How to Be Debt-Free. In addition, here are some important things to consider for the next three big life changes you’re likely to experience.
Tips for Millennials on getting married or living together
- Discuss money matters early on and be honest with one another. Financial infidelity is a real problem that can put a strain on even the strongest relationships.
- Look at your assets and liabilities. Know what each others’ financial obligations are and how you’ll take care of them.
- Talk about your credit histories. They will impact your ability to obtain future credit or a mortgage.
- Discuss your financial goals. Are they compatible? You are going to be a team, and your partner’s goal of taking a couple island vacations a year may not mesh with your goal of buying a home in two years.
- Discuss your shared financial responsibilities. Who will pay the monthly bills? How will spending be monitored?
- Will you have joint bank accounts or individual ones? Make sure you are both on the same page before you make that final commitment.
- Discuss your wedding budget and expectations. Weddings can be expensive—sometimes very expensive. Know what you can afford to spend and discuss both of your expectations for the big day before you start making plans.
Tips for Millennials when buying a home
- Start saving for a home as soon as you can. And put the funds into a TFSA and/or an RRSP. The longer these funds are invested, the more time they will have to grow. A first-time homebuyer can withdraw funds from their RRSP to use as a down payment, but the funds do have to be returned to the RRSP over time to avoid tax implications.
- Determine your budget. Think about how much money you are comfortable spending on your home. The bank or mortgage company will tell you the maximum they are willing to loan you for a mortgage, but that doesn’t mean you should take on the full amount just because it’s available to you.
- Do your homework. There is a lot more to home ownership than simply getting a mortgage. You need to consider the down payment, mortgage insurance, home inspection costs, closing costs, legal fees, moving expenses, house insurance, utility deposits, and a host of other expenses. These funds need to be available for you to close on the home and complete your move.
Tips for Millennials when having a baby
- Practice living on a reduced income before the baby arrives. Your income will likely decrease when you are on maternity and/or paternity and you’ll have a lot of new expenses caring for the newborn, so start preparing early.
- Calculate your new monthly expenses. Check with family and friends regarding the cost of diapers, formula, baby clothes, daycare, and other expenses.
- Know the difference between needs and wants. You may have to reduce or eliminate some of the finer things you were accustomed to, such as dining out or taking vacations, in order to balance your budget.
- Sign up for a baby registry. Friends and family can help purchase items your baby will need.
- Consider secondhand. You can visit top-notch secondhand stores and/or get secondhand items from family and friends. But make sure items like cribs, car seats and strollers meet current standards.
- Plan for child care costs. Explore options such as daycare centres, home daycare, and sitters. Does the cost benefit of one parent staying home offset the cost of care?
- Register your new baby. Make sure to register your child’s birth so you can get any benefits that you are entitled to, and always claim child care expenses on your tax return.
Be financially prepared for every stage of life
Home buying, marriage, and child-rearing are just some of the life changes you can expect as you get older. But you’ll notice a similar theme across all three that will apply to everything else in life, from your child’s education to retirement—and that is the need to be prepared. Preparation prevents surprises, and reduces stress.
Get free expert money management advice from Credit Canada
If you’re feeling unprepared for the future, or just need some financial advice, the capable credit counsellors at Credit Canada can help. All of our counselling is 100% free, and we have the money experts available to give you the best of the best advice when it comes to building a budget you can manage on your current income and preparing for your future goals. Give us a call at 1.800.267.2272 and we can set you up with a free appointment with one of our certified Credit Counsellors.