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Students keep RRSPs on back burner until after graduation

Spring break is much more on the minds of students than saving for retirement.

Money-smart and looking at careers in finance, 17-year-old Olivier Mariani and his classmates don't think that RRSPs are really for them – at least not yet.

Why not? After all, financial experts often say you can never be too young to put some of your earned money into an registered retirement savings plan.

"We're just enjoying our lives," said Mr. Mariani, who's interested in becoming a hedge fund manager. "After university it's time to get more serious about real things."

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But that doesn't mean some teenagers aren't aware that they'll get a leg-up by planning their financial future sooner. Elhanan Moryoussef says he doesn't see the need to open an RRSP this year before the Feb. 29 deadline.

"I will only get serious about it after university when I have some real money," said Mr. Moryoussef, 18. But he said he knows it's good to start early. "One thing I do know about RRSPs is that you're way better off starting at 20 than at 30."

Mr. Mariani and Mr. Moryoussef were in the library at the private Marianopolis College with friends Jamie Eichenbaum and Tony Zhang, talking about investing and saving money. Mr. Zhang said opening an RRSP corresponds with the stability of getting a full-time job.

"I feel I will be more mature and understand more about investing," said Mr. Zhang, also 18.

Mr. Eichenbaum said he's also leaning toward opening an RRSP after university, and would consider opening a tax-free savings account first. Tax-free savings accounts, or TFSAs, allow Canadians to save up to $5,000 each year with all earnings and withdrawals exempt from taxation.

"But I do like the RRSP because it's more structured, I think," said Mr. Eichenbaum, 17. "But it's more about the research and figuring out which one to choose. Usually if I want to invest in something, it's something that I have researched for a long period of time."

Bank of Montreal financial planner Alexander Tkachyk said since students' incomes likely aren't high, a good alternative to an RRSP is a tax-free savings account.

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"It's much more flexible; you have tax-free growth," Mr. Tkachyk said. "If you have to take the money out for a rainy day, to buy a car, or a down payment for additional university studies, etc., it's not added back to your income."

But an 18-year-old student who has some money to put into an RRSP will see the funds compound over a longer period of time, he said, compared with someone starting an RRSP at age 28. But how do you get this message through that it's good to start young?

"I think, ideally, it's to try to strike a balance. I don't think what I am preaching is to cancel that spring break trip down south," said Mr. Tkachyk, 28, who graduated six years ago from Western University in London, Ont.

"But there really has to be a lot of willpower on the part of the individual. I think a lot of it starts at home, absolutely."

Bruno Delorme, the students' business teacher, said young people want and need more financial literacy in the classroom, including information about RRSPs and tax-free savings accounts.

"One of the key success factors in finance is that compounding effect of money," Mr. Delorme said. "If the students begin to invest, albeit a small amount like $500 annually, if they should start at the age of 16, 17, 18, by the age of 50 or 55, they could be rich people."

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Even if Mr. Zhang and his friends say they're not ready to open RRSPs, they understand the importance of being ready for retirements that are many years down the road.

"Younger people, they think more about the present and how they're going to spend their pocket money. It's important to save for the future, for when you retire," Mr. Zhang said.

For tips, stories, videos and live chats ahead of this year's RRSP contribution deadline, check the Globe Investor 2012 RRSP season section for daily updates.

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