Money Mistakes Young Canadians Make in Their 20s

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Financial independence in one’s 20s often comes with limited experience and minimal formal education in personal finance. For many young adults in Canada, this period marks the beginning of financial decision-making—yet it is also when some of the most costly money mistakes occur.

According to Statistics Canada, Canada now has the highest household debt-to-disposable income ratio in the G7, sitting at 185%, compared to the G7 average of 125%. This debt burden is especially pronounced among younger Canadians, who are increasingly turning away from homeownership due to rising mortgage costs, unaffordable rent, and sustained inflation in essentials like food and transportation.

Meanwhile, a 2025 national survey revealed that 41% of Canadians aged 30–44 say financial mistakes have delayed key milestones, such as paying off debt or making major purchases. Nearly 46.4% struggle to build savings, and 42% of young Canadians turn to loved ones for financial support after making money mistakes. On top of that, Gen Z is now the most targeted demographic for financial fraud, with 45% reporting scam attempts in 2024, yet 51% say they wouldn’t talk about it with family, increasing their vulnerability.

From credit card debt to lifestyle inflation, the most common money mistakes in your 20s aren’t just about numbers—they’re about habits, blind spots, and missed opportunities. The good news? These missteps are fixable. With a little guidance and a lot of intention, you can rewrite your financial story before it’s too late.

Why Financial Planning Isn’t Second Nature

Financial planning is not a standard part of the Canadian school curriculum. While students graduate with knowledge of literature, mathematics, and science, few leave with practical skills in budgeting, credit management, or tax filing. This lack of formal education leaves many young adults unprepared to make informed financial decisions, increasing their vulnerability to costly financial mistakes early in life.

Even well-intentioned choices—such as taking out student loans, signing rental agreements, or applying for credit cards—can have long-term consequences if made without a clear understanding of personal finance. Compounding the issue is the fact that financial topics are often considered private or uncomfortable to discuss within families. As a result, many young Canadians learn through trial and error, often after experiencing setbacks.

Improving financial literacy requires proactive engagement. Free resources such as the Financial Consumer Agency of Canada, nonprofit organizations, and reputable personal finance educators offer accessible tools and guidance. By seeking out this information early, individuals can build confidence and competence in managing their finances and avoid common money mistakes that hinder long-term stability.

The Most Common Money Mistakes in Your 20s

1. Living Without a Budget
   Many young adults rely on mental math or bank app balances to gauge spending, which often leads to overspending and surprise overdrafts. Without a clear plan, it’s easy to lose track of where your money is going.
   How to Fix it: Use budgeting tools like Mint, YNAB, or even a simple spreadsheet. Allocate funds for essentials, savings, and discretionary spending. Budgeting isn’t restrictive—it’s empowering.
2. Misusing Credit Cards
   Credit cards can be a helpful tool for building credit, but they’re also a trap if misused. Racking up debt for lifestyle purchases or only paying the minimum balance leads to high interest and long-term financial strain.
   How to Fix it: Treat your credit card like a debit card. Only charge what you can pay off in full each month. If you’re already in debt, prioritize high-interest balances and consider a balance transfer or debt consolidation.
3. Ignoring Retirement Savings
   Retirement feels light-years away in your 20s, but delaying savings is a costly mistake. Thanks to compound interest, even small contributions now can grow exponentially over time.
   How to Fix it: Open a TFSA or RRSP and automate monthly contributions—even $50/month makes a difference. Take advantage of employer-matching programs if available.
4. Spending More Than You Earn
   This is the cardinal sin of Canadian personal finance. It’s tempting to keep up with friends who are always eating out, traveling, or upgrading to the latest tech. But living a lifestyle that exceeds your income is a guaranteed way to stay broke. Delayed gratification is tough, but essential.There is no law against being young and inexperienced. It happens to all of us. However, there is one old adage which explains the fundamentals of solvency: ‘Spend less than you bring in.’ If you don’t, whether through sheer necessity, ignorance or just lack of prudent spending habits (such as delaying gratification) you will eventually have to see an Insolvency Trustee someday. Whether it’s lifestyle inflation, peer pressure, or poor planning, spending beyond your means leads to debt and financial instability.
   How to Fix it: Track your income and expenses. If your spending exceeds your income, cut back on non-essentials, negotiate bills, or find ways to increase earnings through side gigs or freelance work.
5. Not Building an Emergency Fund
   Life is unpredictable. Car repairs, job loss, or medical expenses can derail your finances if you’re unprepared. Many young adults skip this step, assuming they’ll “figure it out” when the time comes.
   How to Fix it: Aim to save 3–6 months’ worth of expenses in a high-interest savings account. Start small—$500 is better than nothing—and build gradually.
6. Overcommitting to Housing Costs
   Buying or renting beyond your means is a common trap. Whether it’s the allure of a trendy condo or pressure to “invest” early, housing costs can eat up a disproportionate chunk of your income.
   How to Fix it: Follow the 30% rule—your housing costs should not exceed 30% of your gross income. Consider roommates, smaller spaces, or living slightly outside major urban centres to save.

How to Avoid Financial Mistakes When You’re Young

Avoiding money mistakes in your 20s isn’t about perfection—it’s about awareness and intention. Here are some proactive strategies to help you stay ahead:

• Educate Yourself – Read Canadian personal finance blogs, listen to podcasts, and follow experts like Preet Banerjee or Melissa Leong who are well-known and respected personal finance educators in Canada.
• Automate Everything: – Set up automatic transfers for savings, bill payments, and investments. This reduces the chance of missed payments and builds consistency.
• Track Your Net Worth – Use tools like Wealthica or a simple spreadsheet to monitor your assets and liabilities. Watching your net worth grow is motivating.
• Practice Delayed Gratification – Resist impulse purchases. Give yourself a 48-hour cooling-off period before buying non-essentials.
• Ask for Help – Don’t be afraid to consult with financial advisors or use free nonprofit services for personalized support.

Money Tips for Young Adults in Canada

Building financial resilience means more than just saving money—it’s about developing habits, knowledge, and confidence that help you weather life’s ups and downs. Whether you’re navigating student loans, managing your first paycheck, or planning for long-term goals, these practical tips can help you take control of your financial future with clarity and confidence.

• Start Investing Early – Use robo-advisors like Wealthsimple or Questrade to begin with low fees and diversified portfolios.
• Use Cash-Back and Rewards Wisely – Choose credit cards that align with your spending habits and pay off balances monthly.
• Avoid Lifestyle Inflation – As your income grows, resist the urge to upgrade everything. Save or invest the difference.
• Review Subscriptions – Audit your monthly subscriptions—streaming, gym, apps—and cancel what you don’t use.
• Shop Around for Insurance – Compare rates annually for car, tenant, and health insurance. Loyalty doesn’t always pay.

When to Speak with a Licensed Insolvency Trustee

For young adults facing persistent debt or financial stress, consulting a Licensed Insolvency Trustee (LIT) can be a constructive step. LITs are federally regulated professionals authorized to administer consumer proposals and bankruptcies, but their role extends beyond insolvency proceedings. They offer confidential, judgment-free consultations to assess your financial situation, explain available options, and help you make informed decisions.

Importantly, LITs can also provide practical budgeting advice and help you develop a realistic financial plan. Many offer tools and strategies to track spending, manage debt repayment, and build savings habits. For individuals who struggle with staying on track, LITs can serve as a source of accountability and support, helping to prevent future money mistakes and improve long-term financial stability.

Many trustees provide a free initial meeting, allowing individuals to explore solutions without obligation. Whether you’re overwhelmed by credit card debt, unsure how to prioritize loan repayments, or simply need guidance on managing your finances, speaking with an LIT can clarify your rights and responsibilities and help you avoid more serious financial mistakes.

Conclusion – Early Choices, Lifelong Growth

Everyone makes money mistakes—especially in their 20s. Many Canadian young adults are navigating the same financial challenges. Whether it’s building credit, managing debt, or figuring out how to save, mistakes are part of the learning process. What matters most is how you respond and grow from them.

By recognizing common financial mistakes, exploring ways for how to avoid financial mistakes, and applying practical money tips for young adults, you’re already taking meaningful steps toward financial confidence. Whether you’re building your first budget, paying off debt, or simply trying to make sense of Canadian personal finance, know that support is available and progress is possible.

Financial stability isn’t built overnight. It’s shaped by small, consistent choices—and by asking for help when you need it. Your 20s are not about getting everything right. They’re about laying the groundwork for a future that reflects your values, goals, and resilience.

So take heart. You’re not behind. You’re just getting started—and that’s a powerful place to be.

Take the First Step Toward Financial Clarity

If you’re feeling overwhelmed by debt or unsure how to manage your finances, don’t wait. Licensed Insolvency Trustees offer more than debt relief—they provide hands-on budgeting support and clear, practical guidance to help you take control. A free, confidential consultation could be the turning point toward clarity, confidence, and lasting financial stability. Reach out today and take that first step.

Contact Richard Killen
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