# Advise for 21 year old with disposable income?



## Frznrth (Jan 24, 2019)

Hi
My 21 year old son is lucky enough to be starting a university coop work program for 1 year. He is just finishing his third year. The job is a camp job in northern Alberta - he won’t have any living expenses - almost all of his income will be disposable. He has no debt. 
He asked me for advice. I’d like him to use this opportunity to help with his future but I have no idea what to tell him. Any suggestions? Or who he can get good advice from in Calgary? He does have a TFSA that has a good amount of space. 
Thanks for the help.


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## cainvest (May 1, 2013)

A simple approach would just be to buy an "All in one" product like VBAL or Mawer 104 balanced fund.


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## MrMatt (Dec 21, 2011)

TFSA for all the extra money, he's going to have to spend it when he gets back to school anyway.

Most importantly, make sure he does his taxes, at least once, by hand, on paper.
I know "kids these days", but really sitting down, on paper, just to learn it, is IMO invaluable.


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## Frznrth (Jan 24, 2019)

He won’t need the money when he goes back for his 4th year thanks to RESPs. 
All I can possibly see in his future for a need might be to put a down payment on a house but that wouldn’t be for at least 2 years. This would be a fairly shot and conservative investment window. Appropriate for someone so young?
Doing taxes by hand might be interesting.


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## MrMatt (Dec 21, 2011)

Frznrth said:


> He won’t need the money when he goes back for his 4th year thanks to RESPs.
> All I can possibly see in his future for a need might be to put a down payment on a house but that wouldn’t be for at least 2 years. This would be a fairly shot and conservative investment window. Appropriate for someone so young?
> Doing taxes by hand might be interesting.


It will take a few hours, and he'll learn a lot.
You would be stunned at the high number of highly educated people who don't know how taxes work.

Fortunately as an engineering grad, I took up the challenge to learn taxes from "first principles, ie doing them by hand"


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## Frznrth (Jan 24, 2019)

I read in a similar topic that these books can be a good way to start. Millionaire Teacher by Andrew Hallam, and If You Can, How Millennials Can Get Rich Slowly by William Bernstein.
I ordered both for him. Any others?

Is it worth trying to find someone to give him advise? Are there good people in Calgary that would be willing to help someone starting out?

Even after filling up his TFSA he will have a fair chunk left over - if he is going to buy me that Hawaiian beach house for my golden years he better be smart.


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## cainvest (May 1, 2013)

Frznrth said:


> Even after filling up his TFSA he will have a fair chunk left over - if he is going to buy me that Hawaiian beach house for my golden years he better be smart.


It's not all that difficult, for example ....
Each year max out TFSA ($6k) and put the same amount into RRSP ($6k+refund) buying Mawer fund 104.
After about 30 years he'll have $1 million for retirement (minus RRSP taxes).

A few assumptions of course,

past history isn't always an indicator of future returns
RRSP pros/cons depend on his tax brackets when buying vs selling
He can continue to put 12k away each year and not withdraw any funds

If he can put more away it'll grow faster and get you to your beach house sooner.


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## Frznrth (Jan 24, 2019)

Thanks everyone for the help. 

Hopefully he can get into the habit of setting aside money every year. This next year though seems like a once in a lifetime gift. His taxes should be minimal as the income will be over 2 different tax years and lots of his income will be tax free as it’s living allowances and such. 
Unless he puts a early down payment on my beach house he should clear about 60k. Investing this wisely would hopefully give him a good start. I wish I had been so lucky when I was his age.


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## james4beach (Nov 15, 2012)

If he's going to northern Alberta you might want to do everything you can to keep him away from drugs & alcohol.

He's going to be around many people who are very bad influences. Maybe take a drive with him through the rough part of town and explain how men fall into the condition you see on the streets... I'm serious, try to scare him about this.


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## Frznrth (Jan 24, 2019)

Thanks. I have heard of the horror stories. I’m not too concerned though. He’ll be in a camp more than an hour out of Fort Mac and will fly back to Calgary every week and he’s not into the party scene. Especially if we can lock away 90% of his pay before he’s even tempted to do something stupid with it.


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## Retiredguy (Jul 24, 2013)

Make sure he stays off Car/Truck lots !


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## Frznrth (Jan 24, 2019)

The Mawer fund looks like a good choice. Would buying this alone be enough diversity? Too conservative for long term? Personally I’d be more than happy with anything that has had its history of success - assuming though that this continues - Its easy to be freaked by what the future might bring - but that has likely always been the case.


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## MrMatt (Dec 21, 2011)

Frznrth said:


> The Mawer fund looks like a good choice. Would buying this alone be enough diversity? Too conservative for long term? Personally I’d be more than happy with anything that has had its history of success - assuming though that this continues - Its easy to be freaked by what the future might bring - but that has likely always been the case.


Mawer has a lot of good funds.

But what _HE_ should do is build a plan, and invest accordingly.


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## cainvest (May 1, 2013)

Frznrth said:


> The Mawer fund looks like a good choice. Would buying this alone be enough diversity? Too conservative for long term? Personally I’d be more than happy with anything that has had its history of success - assuming though that this continues - Its easy to be freaked by what the future might bring - but that has likely always been the case.


Enough diveristy ... yes.
Too conservative ... depends on the person.

Can always buy VBAL or VGRO etfs in TFSA and Mawer in RRSP if you'd like to mix it up a little. Simple is good, time is on his side (compounding), freaking out (selling) normally causes big losses.

Also people may always try for better returns but usually "get rich quick" avenues end up being a bad idea.


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## Frznrth (Jan 24, 2019)

Thanks. I definitely hear the fallacy of trying to do it quickly. 
Any guides for what a financial “plan” should include?


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## Plugging Along (Jan 3, 2011)

MrMatt said:


> TFSA for all the extra money, he's going to have to spend it when he gets back to school anyway.
> 
> Most importantly, make sure he does his taxes, at least once, by hand, on paper.
> I know "kids these days", but really sitting down, on paper, just to learn it, is IMO invaluable.


Great advice. I had to all my taxes by hand starting the first year I had a T4 job at 16. I was a tax volunteer in university (I was in accounting) and earned a lot of beers and drinks from my friends throughout University helping them with their taxes. I want my kids to get a part time job just so I walk them through their first tax returns at home. They do not see the excitement.


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## MrMatt (Dec 21, 2011)

Plugging Along said:


> Great advice. I had to all my taxes by hand starting the first year I had a T4 job at 16. I was a tax volunteer in university (I was in accounting) and earned a lot of beers and drinks from my friends throughout University helping them with their taxes. I want my kids to get a part time job just so I walk them through their first tax returns at home. They do not see the excitement.


No, but when they're at university and throughtout their careers and people are spouting nonsense out of ignorance, they'll realize you taught them something.


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## dotnet_nerd (Jul 1, 2009)

It's amazing all the advice the OP gets. 

No shortage of armchair advisors willing to spend someone else's money.


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## cainvest (May 1, 2013)

dotnet_nerd said:


> It's amazing all the advice the OP gets.
> 
> No shortage of armchair advisors willing to spend someone else's money.


Don't you mean ... No shortage of armchair advisors willing to *save* someone else's money.


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## londoncalling (Sep 17, 2011)

Retiredguy said:


> Make sure he stays off Car/Truck lots !


Seeng as you've identifed that he is not tempted by the party scene (and trust me 1 hr away from Fort Ma does not eliminate the Drug/Alcohol issue in the least) I think this is the second most important piece of advice is the post by retiredguy. I know many a person who went off to Fort Mac to amass a fortune and get a jump on life only to still be stuck there paying years later for their lifestyle habits which include but are not limited to drugs, alcohol, gambling, trucks, cars, boats, snowmobiles, motorcycles, quads, jetskis, cottages, houses they can't afford and never get to live in. the opposite sex, vacations etc. I am not saying to become a shut in and hide from the world but more so don't be dazzled by the shiny things that seem to capture one's attention but do little else. I worked in similar environments and was fairly responsible but am astonished by the fortune I could have amassed in my 20s had I been a little more focused. I avoided many of the traps mentioned in this post but not all of them. I would agree TFSA and RRSP are first steps. May be best to defer the RRSP deduction to future years when income earnings will be higher. A big refund is very tempting but net zero is the goal. I had my best tax return ever this year with a refund of $3.81. In years previous I was also excited for a giant refund. Best of luck to your son. It looks like he is off to a great start.


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## peterk (May 16, 2010)

james4beach said:


> If he's going to northern Alberta you might want to do everything you can to keep him away from drugs & alcohol.
> 
> He's going to be around many people who are very bad influences. Maybe take a drive with him through the rough part of town and explain how men fall into the condition you see on the streets... I'm serious, try to scare him about this.


Normally yes, a concern, I imagine the camps are more like a jail now though with not much access to parties. The bigger concern will be overeating and become fat. But 21 year olds don't need to worry about that for several years.

Agreed though with Retiredguy, that the biggest worry is the truck dealership.


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## Plugging Along (Jan 3, 2011)

Frznrth said:


> Hi
> My 21 year old son is lucky enough to be starting a university coop work program for 1 year. He is just finishing his third year. The job is a camp job in northern Alberta - he won’t have any living expenses - almost all of his income will be disposable. He has no debt.
> He asked me for advice. I’d like him to use this opportunity to help with his future but I have no idea what to tell him. Any suggestions? Or who he can get good advice from in Calgary? He does have a TFSA that has a good amount of space.
> Thanks for the help.


What Is your SON’S desired outcome and type of advice he is looking for? He wants advice but I am not sure where his headspace is at. 

Does he see this as an opportunity Too?



Frznrth said:


> Thanks. I have heard of the horror stories. I’m not too concerned though. He’ll be in a camp more than an hour out of Fort Mac and will fly back to Calgary every week and he’s not into the party scene. Especially if we can lock away 90% of his pay before he’s even tempted to do something stupid with it.


i hope he wants to stay out of drug and party scene too. It can be pretty bad. Did he agree that he wants to save 90% of what he earns? if so, that’s fantastic. If not, you will want to discuss with him what he wants to save with his own money and have him come up with an mam pint he is comfortable with based on his further goals. 



Frznrth said:


> I read in a similar topic that these books can be a good way to start. Millionaire Teacher by Andrew Hallam, and If You Can, How Millennials Can Get Rich Slowly by William Bernstein.
> I ordered both for him. Any others?
> 
> Is it worth trying to find someone to give him advise? Are there good people in Calgary that would be willing to help someone starting out?
> ...


What. does he want and need to learn? I personally believe people jump too quickly into the WHAT do I invest in before understanding some fundamentals in determining what kind of investor you are.

Dome areas or questions I would look at to ensure he understand:

the importance of saving? Sounds like he does
types of accounts, TFSA, RRSP, Unregistered accounts, impacts Of taxes
time horizon of investments - this requires him think about what he might need money for and when.
risk toleranice - this is huge. One should not even consider investing fully until they understand what their risks tolerance is and how it relates to their time frames

So my advice, is put the money in a TFSA until that is max, then RRSP contribution [if any room) He can decide when to take the deuduction later if his income is low, but grow it tax deferred. Any more money he has to invest, put it in either a non registered account or HISA until he figures it out. 

For what to invest in or how. This will depend on what he wants to learn. Does he want to manage his own account learn about the different types of investments? If so, I would start with Coach potatoe until he learns morel. Hecannlearn what allocations makes sense for him. he would also want to learn about the tax position as different investments are better in different accounts.

if he is overwhelmed with the thought, he can go to banker or an advisor, keep in mind they will make a fee and will mot always look out for his best interests, but there are some good advisors out there. I found mine primarily through family, and he doesn’t take on new clients. With smaller account the MERS are pretty small, and he can call if he has an advisor. Honestly, that’s how I started.


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## Plugging Along (Jan 3, 2011)

some anecdotal stories. We know a lot of people that went up to Fort Mac to make huge money At both young and old ages. Our friends and Families kids did this. there were many that blew all the money were worst out coming out other than the toys, there was nothing long perm to show. There were also many that really did great used this as an opportunity. 

as others have said, drugs and alcohol were the first things that was a downfall For many. Many don’t gl thinking they are going to blow it all,but do. They get really bored being in the middle of no where with nothing to do, few females and no true relationships. So they party like everyone else. Make sure he has ideas on what he will do when he is bored and lonely. 

then the toys, the monster truck is an easy one. It’s hard to say now when you are really bored. 

Get him To save them money and stay clean, then worry about what to invest in. Learning to invest would be a great way to fill time.


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## :) lonewolf (Feb 9, 2020)

keep it simple tell him to spend less then he makes. As for investing would recommend the Market Wizard books by Jack Swagger Then anything written by Robert Prechter spelling ?


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## Fain (Oct 11, 2009)

Frznrth said:


> Hi
> My 21 year old son is lucky enough to be starting a university coop work program for 1 year. He is just finishing his third year. The job is a camp job in northern Alberta - he won’t have any living expenses - almost all of his income will be disposable. He has no debt.
> He asked me for advice. I’d like him to use this opportunity to help with his future but I have no idea what to tell him. Any suggestions? Or who he can get good advice from in Calgary? He does have a TFSA that has a good amount of space.
> Thanks for the help.


If he's going to spend money partying, it's better to spend it on a nice 4-6 month Euro-trip vacation once he's done the 4th year of university. Better than partying in those depressing camps and he'll have the time of his life.


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