Financial Literacy - JA South Western Ontario

Why RRSP Season Should Interest Teenagers (and How Junior Achievement Supports Early Retirement Planning)

RRSP planning for teens

Retirement planning is too often considered a distant concern for teenagers, who are more focused on immediate priorities like school, social activities, and part-time jobs. However, in today’s economic landscape, starting retirement planning early has become increasingly important. With RRSP (Registered Retirement Savings Plan) season in full swing, it’s an opportune moment to discuss why teenagers should take an interest in retirement planning and how organizations like Junior Achievement are supporting youth in this endeavor.

Understanding Long-Term Financial Goals: Teenagers are at a pivotal stage where they begin to envision their future careers and lifestyles. While retirement may seem far off, establishing long-term financial goals early on can significantly impact their financial well-being later in life. By understanding the importance of saving for retirement now, teenagers can set themselves on the path towards financial independence and security.
Harnessing the Power of Compound Interest: One of the most significant advantages of starting retirement planning early is the power of compound interest. By starting to save and invest early, teenagers can take advantage of the compounding effect, where their money earns interest on both the principal amount and the interest already earned. This can lead to significant growth over time, even with relatively small contributions.
Developing Financial Responsibility: Learning about retirement planning at a young age fosters financial responsibility and discipline. By budgeting for retirement savings alongside other expenses, young people develop crucial money management skills that will serve them well throughout their lives. Understanding spending, saving, and investing empowers youth.
Adapting to Economic Uncertainty: Young people are not immune to the effects of economic uncertainty. As the cost of living continues to rise, without adequate retirement savings, teenagers risk facing financial insecurity in their later years. By starting to save and invest early, they can better prepare themselves to meet future financial challenges.

Note that there is no minimum age to open an RRSP. If a Canadian has employment income and files a tax return, they (or their guardian) may set up and contribute to an RRSP. The same is not true for tax-free savings accounts (TFSAs), which require a minimum of at least 18 years of age.

While the benefits of early retirement planning for teenagers are clear, the question remains: how can they access the necessary knowledge and resources to get started? This is where organizations like Junior Achievement (JA) step in.

Junior Achievement is a global nonprofit organization dedicated to empowering young people to succeed in the global economy. One of the key components of JA’s programs is financial literacy education, which includes topics such as budgeting, saving, and investing. Through a variety of learning experiences and resources, JA equips young people with the skills and knowledge they need to navigate the complexities of the financial world.

Through interactive classroom programs such as JA Personal Finance, real-world simulations like JA Investment Strategies, and online resources including JA’s Your Money Questions Answered modules, teenagers learn about the importance of starting early, the different investment options available, and the impact of compound growth on their retirement savings.

RRSP season serves as a timely reminder that retirement planning is not just for adults – even teenagers can benefit from starting to save and invest early. By understanding their own long-term goals, harnessing the power of compound interest, developing financial responsibility, and adapting to economic uncertainty, young people can lay a strong foundation for a prosperous financial future. It is more important than ever for young people to take control of their financial futures, and organizations like Junior Achievement play a vital role in supporting youth in starting retirement planning early, providing them with the knowledge and resources they need to succeed.

Karen Chafe
Director, Programs & Operations
JA South Western Ontario

Closing the Financial Literacy Gap: A Call for Collaborative Action

I remember clearly my first week attending university. I was nervously navigating unfamiliar hallways, classes, and other new realities when I came upon a series of booths set up in the campus food court. Each was a bank or other financial institution vying for my attention and sharing the opportunity to sign up for my very first credit card. My reaction? No way! My impression at the time was that credit was bad and should be avoided at all costs. Money was not a topic I had the opportunity to learn much about in school and I had little exposure to the benefits of having a credit card and using it responsibly to help build my personal credit.

November is Financial Literacy Month in Canada, a time to bring attention to the importance of developing strong money awareness and positive money attitudes and to help Canadians manage their money and debt wisely, save for the future, and understand their financial rights. This is especially important for young people who are just beginning to develop knowledge and perspectives related to money. It is even more important now, at a time when rapid inflation, rising interest rates, and other economic influences have amplified the financial challenges faced by many, especially those with vulnerabilities.

But where does responsibility for financial education lie?

For many, the greatest source of financial information and learning is at home. Parents play a significant role in laying the foundation of financial readiness and resilience for their children. However, according to a 2021 survey conducted by TD, one in three Canadian parents aren’t confident they’re setting a healthy financial example for their children, and only about 10 percent of parents consider their household to be in “excellent financial health”. According to the National Financial Literacy Strategy 2021-2026, the Financial Consumer Agency of Canada (FCAC) has conducted a survey and found that only 61% of Canadians could correctly answer five of seven financial literacy questions. If we rely solely on the home to provide these valuable lessons, we run the risk of perpetuating the same level of financial literacy that currently exists with little opportunity for improvement.

The Ontario Ministry of Education has recognized the need for financial education to also take place in schools and has introduced curriculum outcomes linked to financial literacy at several places throughout a student’s K-12 education. There is mandatory learning about financial literacy now embedded in Grades 1 to 8 Mathematics, in the Grade 9 Mathematics course, and in the Grade 10 Career Studies Course. In 2023, the Ontario Ministry of Education also made available three self-guided learning modules for high school students available through the ministry’s website. These are very positive steps toward ensuring young people have every opportunity to improve their financial readiness.

Organizations like Junior Achievement (JA) South Western Ontario also strive to equip young people with the skills and attitudes needed for lifelong success when it comes to money matters. JA offers learning experiences that can be facilitated by teachers or community volunteers or completed independently by students online. These experiences support and reinforce the curriculum outcomes taught in schools and the lessons learned at home.

The reality is that we all bear responsibility in the effort to better equip young people with financial confidence and resilience. Families, schools, and communities working together will provide the best possible combination of knowledge, skills, attitudes, and experiences for young people. Programs that are interactive, interesting, and relatable to students will help them see the importance and enable them to apply the learning to their own lives. As a result, young people will be ready to navigate the financial challenges ahead, assessing their options intelligently and making good decisions with confidence.

Karen Chafe
Director, Programs & Operations
JA South Western Ontario

About the Author

A proud aluma of the JA Company Program, Karen Chafe has worked with JA for over 11 years and is currently Director, Programs and Operations for JA South Western Ontario. Karen is a former high school mathematics teacher and is passionate about providing youth with impactful learning experiences.

Photo of Karen Chafe for our The Spark article Closing the Financial Literacy Gap: A Call for Collaborative Action

Karen Chafe