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For the twentysomething graduates stepping into low-paying jobs after years of studying and racking up debt, a little fun and a celebratory purchase may feel like a well-deserved treat.
But financial planners warn against getting too carried away, and suggest that with an average school debt level of $28,000, people in that demographic turn their attention to getting back on solid financial footing as quickly as possible.
"Every generation has its challenges, but for this one it's debt," said Hedy Luetjen-Scott, a financial adviser with Edward Jones, north of Toronto.
She suggests students try to get a part-time job, preferably one that relates to their field of study, while still in school. Not only will that help offset expenses, but it could also help secure employment once they are ready to leave college or university.
Once their working life begins in earnest, she recommends immediately tackling student and other debt to lose as little as possible to interest payments.
Even though the government often allows you a six-month window after you finish school to start paying back student loans, the interest, Luetjen-Scott notes, starts ticking the minute you finish your studies. Those rates will vary in different provinces, but most average at least 5 per cent.
"You really want to be aware of what the debt is, and try to have a goal," she said.
While she acknowledges that people often want to treat themselves after the accomplishment of a university or college degree, or landing a job, she strongly cautions against spontaneous purchases, big or small.
"It may seem harsh, but it's really important, because eventually you're going to want to buy a condo or a house and you'll have to come up with a down payment," Luetjen-Scott said.
A survey by TD Canada Trust released last month of 6,014 Canadians age 18 years and older found 34 per cent of Gen Y struggle to save in the face of challenges such as high education costs, low salaries, high debt loads and the temptation to shop beyond their means.
The bank's research found that 44 per cent of those in their twenties found paying for education to be a challenge, compared to 18 per cent of baby boomers, while 39 per cent of millennials considered salaries too low to cover living expenses, compared to 30 per cent of the older demographic.
Another 38 per cent were struggling with debts from credit cards, loans and lines of credit, compared to 26 per cent of people in their parents' generation.
TD also found that 36 per cent of those in the Gen Y category struggled with the temptation to shop beyond their means, more than double the 16 per cent of boomers. The online poll surveyed 1,311 millennials, born between 1981 and 1999, and 2,186 boomers born between 1946 and 1964. Responses were collected between Jan. 10 and 25.
Todd Sigurdson, a tax and estate planning specialist with Investors Group, says it's important to save, even if it's just $50 or $100 a month.
"If they can get into the habit of saving, then they can slowly increase that as they pay down that debt or progressively get into that higher paying job which frees up a bit more cash," he said.
Setting a budget and financial goals are key to allowing saving and debt reduction to happen at the same time. This gives people more freedom to choose how they want to spend their money.
"You want to enjoy life as well; so you need to find a balance between paying down that debt and meeting your own personal goals," Sigurdson said.
But you should also start building an emergency fund, which he suggests doing through a tax-free savings account. TFSAs, which were introduced four years ago, allow Canadians to earn money on deposits and investments inside the account without attracting any income tax, even when the money is withdrawn.
He favours that vehicle because of its versatility – it can be used as a rainy day fund, for retirement savings or to save for a major purchase. The accounts have a maximum annual contribution of $5,500, and there are no tax penalties for account holders if they put back the amounts they withdraw from a TFSA in a later calendar year.
Luetjen-Scott recommends investing in an RRSP, which combines savings with a tax break. Later, investors can borrow from the RRSP for help with a down payment on a home, without being penalized.
She also suggested enrolling in a company pension plan, if available, especially if the employer matches contributions.
Another tip, which she suggests with caution, is getting a credit card with no annual fee, to be used "very wisely."
While debit cards or cash should be used for most purchases to help control spending, a credit card can help establish a good credit rating and show the banks that you can manage your money by paying the balance off every month.
That history will come in handy when you need a mortgage or a loan to buy that first car.
Experts agree it all comes down to planning ahead, to maintain some control over your circumstances.
"If you can establish good habits early, that can really set up a good chance of financial success in the future," Sigurdson said.