A little while back, a reader of mine (Suzette) commented on how it would be interesting to read a post that’s aimed at Asians. Her point was that many Asians typically live at home rent-free until they’re married and usually their parents would have paid for their education. As someone who fits that description perfectly, I totally understood what she was getting at.

Let’s be clear this post isn’t aimed specifically at Asians. There are many different cultures that have similar values. This post is basically aimed at anyone who didn’t have to pay for their education, have no debt, and live rent-free. If you fall into that category or close to it, you may want to keep reading.

Live at Home Without Debt

Set your goal

I’ll admit that during my early working years, I blew a ton of cash for no real reason. Well, I guess the reason was that my money was disposable so I ended up buying things that I really didn’t need such as collectible toys and dvds. I figured since I was saving 10% of my income, I could spend the rest on whatever else I wanted.

It’s not like this spending set me back, but because I didn’t have a goal in mind, I never worked towards it. In hindsight, I should have put aside as much money as possible towards a home down payment. I realize that a 21-year-old likely isn’t thinking about homeownership, but I just wanted to make the point that you need to set a savings goal.

Although I always saved some money, I got really serious about it when I knew I was going to propose to my girlfriend. I knew the engagement ring and wedding would be expensive so I started to cut out any unnecessary spending and put it towards that savings goal.

Some people would say planned spending such as a wedding or a car is not savings, but if you have some kind of a goal in mind, you can work towards it. This is especially important for people who don’t have many expenses since these can be some prime years where you can put aside more money.

Consider your time frame

If you don’t have a specific goal in mind, you may want to think about your time frame. If you think you’ll need the money you’re putting aside in less than five years, then you should put it in a high-interest savings account since it’s pretty much a risk-free investment. EQ Bank, Tangerine, and Alterna all offer online accounts that offer a good amount of interest so those are good places to start.

If you’re not sure if you need that money soon, consider investing half of everything you save into longer-term investments that will give you a better return. Things such as ETFs or index funds would be a good bet. However, before you get started, you need to read the basics about personal finance so you understand how investing works.

I should also mention at this time that if your employer offers some kind of retirement savings matching or a stock plan, you should join it now if you haven’t already. These employee benefits are basically free money so there’s no reason why you shouldn’t be taking advantage of it.

Think about what accounts you should be using

If you’re saving for the long term, most people will naturally use their Registered Retirement Savings Plan (RRSP), but that may not be the best place for your money. The main advantage of RRSPs is that contributions lower your taxable income. But if you’re in you’re just out of school, you may not have a huge income so that tax break may not be as important to you.

A better place to invest your money is in your Tax-Free Savings Account. This account gives you a lot of options since you can invest in anything you like such as ETFs, stocks, mutual funds, GICs, etc. Heck, if you just want to build your emergency fund, you could even put your money in a high-interest savings account via an online bank like Alterna or Tangerine.

Now, if you want to start investing that money early, I wouldn’t recommend jumping into stocks. You’re better off going with a robo-advisor such as WealthSimple or Justwealth so you can set it and forget it. Just don’t get obsessed with daily markets swing. Remember, if you need the money in less than 5 years, just keep it in a high-interest savings account.

Don’t feel pressured to do anything

As a child of immigrants, my parents pressured me to buy a home. They even offered to help with the down payment. There’s nothing wrong with buying a home, but you should only do it if you’re ready financially for it.

They may say if you don’t buy, you’ll be priced out forever. That may or may not be true, but the last thing you want to be is house poor so be smart about your housing costs.

On the flip side of things, I think many people in the greater Toronto and Vancouver areas know that housing is insanely expensive so they don’t look down on renting.

There’s also weddings to consider (if you plan on getting married). Many people grow up thinking a big or fairytale wedding is the only way to go. If that’s what you want, go for it, but there are probably better things you can do with $35K+ which is the average cost of a wedding.

Final thoughts

If you’re fortunate to have had your education paid for, you have no debt, and you live at home, you’re in a unique situation. You shouldn’t feel guilty spending, but at the same time, you can really build up your savings quickly. Establish your goals and then save hard for them while your expenses are low.