Here is an email from a young reader “John” who had some questions for me. To summarize, John who is 19, is just starting out in the personal finance world and is wondering what he should do. Below is his email:

..if you don’t mind I have some questions about how you started off your personal finance journey at 16. I’m currently 19 and I work part time. I earn probably about $50-$200 Canadian dollars every month. I don’t work much because I value my grades in school but I’d still like to invest my money in a mutual fund of some kind instead of the savings account I currently have at ING. I guess my question is how did you find a mutual fund for yourself at such a young age. The process seems really intimidating for me right now and if you could shed some light on how I could start at a relatively young age as well I’d appreciate it very much.

If I was to give any advice for someone just starting out, I would suggest that you begin by staying out of debt, if at all possible. If you are carrying debt on your credit cards etc, I would forget about investing and focus on saving your part time earnings and paying down the highest interest debt first.

If you have your debt under control, and you have some RRSP contribution room you might want to start your investing there. RRSP’s are most effective if you foresee yourself having a high salary job later in life. I know that a lot of people will say that starting your RRSP when you have low income is pointless, however since you are young and have your whole life in front of you, you can carry forward your tax deductions for when you have a higher income year and enjoy the years of compounding ahead. An alternative would be to start a non-registered account which is basically considered tax sheltered as you currently have low income.

After you have your RRSP or non-registered account setup, your next question was what investments/mutual funds to pick. If I were in your situation and looking to spend $50-$100/month, I would open an online brokerage account with TD and purchase TD-E funds on a monthly basis. TD-E funds are index funds that have VERY low fees, but must be purchased online without an advisor. What is an index fund? An index fund is a fund that tracks the stocks in a particular stock market index based on market capitalization size (TSX, NASDAQ etc).

When I was young and had a very low balance, I opened an account with a CIBC rep. The account was free but the catch was that I could only purchase CIBC mutual funds, which was fine with me at the time. If I were to start today I would go with TD but I would personally wait for a market correction before purchasing equity index funds.

If you’re looking to do more mutual fund research, these are the sites that I use:

John, please note that this is not financial advice, but what I would consider if I was your age in your situation.

The readers on this blog will most likely give some great advice also, so John, I suggest that you read the comments.


  1. The Financial Blogger on June 6, 2007 at 9:16 am

    I would suggest John to go directly in the non-registered investments for 3 reasons.
    1st, You won’t benefit from tax return now as you would have to carry forward your RRSP contributions.
    2nd, The investments in the RRSP are tax sheltered until you withdraw money from it. As your income is low, you won’t be taxed for your growth. Non-registered is a better option.
    3rd, As you are young and at school, you might encounter rough financial time. You can always cash in your investments if they are non-registered. That would just trigger capital gains which have minimal effect on your tax situation. However, if you withdraw from your RRSP, you won’t be able to put this money back. As your RRSP room is limited, I consider you are better off with non-registered investment.

    Index funds are good because they offer a great potential at a low cost. I also like dividend funds as they are fairly stable and provide a good stability. Make sure to read all characteristics and be aware of all fees related to the mutual funds you are buying. Some of them have low MER’s but high close end fees. A bit of reading won’t hurt :-)

    Hope this helps!

  2. ThickenMyWallet on June 6, 2007 at 12:11 pm

    John may also want to explore options with respect to his bank account. ING is not the highest paying savings account anymore.

    I also agree with Financial Blogger- John’s income falls under the basic personal amount credit (depending on which province you live in the first $9,000 can be earned tax free)- and he’s in a stage in his life where he needs to have money around to meet his growing expenses. He should invest outside registered plans.

    With respect to what product to buy, John should do his research before he buys anything. He should understand what he is buying and why. There’s a lot of product, he just needs to make sure he knows what he is getting himself into.

    Good luck John! Its nice to see someone young taking control of their financial future.

  3. Middle Class Millionaire on June 6, 2007 at 1:02 pm

    I have to agree with FB,

    I don’t’ think that starting an RRSP with so little income would be wise as he’d receive no tax advantages other than the compounded growth inside the RRSP. With so little income it would not matter what he invested in (even if it was all taxed at his marginal rate). It would be preferable if he could accumulate RRSP room which he could then use once he starts working full time. He could even transfer his invested amount from his unregistered account to his registered account once there is a tax advantage to do so.


  4. Riscario Insider on June 7, 2007 at 1:38 am

    It’s great to see young folk planning their financial futures.

    At the risk of being boring, what’s wrong with earning interest in GICs or a savings account? That could be a good starting point. There’s satisfaction in watching money grow steadily without stress or undue monitoring.

    John could allocate earnings between boring fixed interest and the more exciting choices described above.

  5. […] I posted a comment on Million Dollar Journey yesterday that ING does not have the highest rates anymore in high interest savings accounts- guess this is changing rapidly. I also wonder if this is the beginning of another round of interest rate increases for other high interest savings accounts. As I wrote on Monday, RBC managed to secure $1.6 billion of deposits from outside its existing customer base in the first 90 days after it introduced its high interest savings account; so the field is becoming very competitive and financial institutions have to keep making their high interest savings accounts more attractive by increasing interest rates or getting creative with their incentives. With the Prime Rate most likely going up soon, the banks may have room to increase the interest rates on these accounts as well. You have to love competition when it benefits the general public like this! […]

  6. credit card debt on June 19, 2007 at 4:34 am

    It’s nice to see that young people are mature enough to think about investing in their future. When I was 19 I cared only about buying nice stuff. That was the shortest path to credit card debt. I’m still working to straighten out the financial mess I made as a college student.

  7. Cisco Kid on December 13, 2007 at 7:45 pm

    I agree, by most standards (from surrounding peers) I’m ahead of the game. Though I’m way behind John as I’m just getting started at 30, just to find John looking around at such an early age is impressive to me. Keep up the good work, your on the right path to success, just don’t go overboard our you might miss your youth (and you can’t by that at any price)

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