Are you or one of your kids about to turn 18? Congratulations! It’s exciting to become an adult. No more of that, “If you’re living in our house, you’re living under our rules” stuff. I bet you won’t miss that.

That said, become a legal adult can also be a little overwhelming. How can you prepare for it financially? It’s not like there are fitness centers out there for bulking up on your core money management strengths.

Here are a handful of 5 best financial practices for flexing your financial muscles when you turn 18.

1. Working? Open Your Own TFSA

If you are working, I recommend opening your own Tax-Free Savings Account (TFSA) once you’re 18, and starting to save into it regularly – no matter how modestly you can contribute. You’ve probably already heard, the younger you are when you start saving and investing, the more dramatically your savings can grow. Plus, as I covered in this past post, you can super-charge your savings when that growth is tax-free. TFSA earnings are tax-free while they’re earned and when you withdraw them. What’s not to love about that?


2. Going to School? Put Your RESP Account(s) To Work

If you are going on to school, once you’re registered, you can start tapping into any Registered Education Savings Plan (RESP) accounts family may have established for you. Remember all those holidays, when you were only moderately enthused by grandma’s contribution to your education fund? At last, her thoughtful gifts are going to pay off. Higher education should help you pursue a satisfying career and strengthen your earning capacity. Paying for it out of your RESP should help you minimize the debt load you may need to achieve it. Plus, like the TFSA, the earnings and withdrawals are tax-free.


3. Bulk Up Your Credit Score

Whether you’re working, continuing your education, or both, it’s also time to start building your credit score. One possibility is to take out a mobile phone contract in your own name, and pay it off diligently and on time. If you decide to apply for a credit card, and/or bank loans, be careful that you limit this to only what you need, and use them responsibly. Credit cards can be toxic in combination with Internet shopping. Write down how much you can actually afford to spend, and then stick to it. In fact, write down what you make and what you spend. It is powerful information.


A further word about debt. As I’ve covered before, credit card debt and other high-interest loans are bad debt. So again, always pay off your credit card balances in full, and make timely bank loan payments. EVERY SINGLE MONTH. Think of credit cards as a convenient way to spend money you already have while establishing good credit. Do not use any form of debt to stretch beyond your means.


4. Part- or Full-Time Employment? Contribute to the CPP

Whether you’re working part- or full-time, and whether you’re an employee or self-employed, once you turn 18, you will start to contribute to the Canada Pension Plan (CPP). These may be called “contributions,” but they are mandatory and deducted from your salary. You may not love that right now, but your Future You will eventually appreciate the contributions your Current You is making today.


5. Educate Yourself About Money

There is a significant financial media presence designed to inform you and help you. At the same time, learn how to identify the equally large presence – in the media and everywhere else – designed to tempt you into spending and consuming, whether or not you can afford to. There is a lot of peer pressure and emotional marketing going on that has nothing to do with your financial independence, and a lot more to do with financial helplessness.


Again, happy birthday! But whenever you’re a buyer, please beware.