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your money

Andy Porter

These are tough times for twentysomethings. Having racked up massive debt, they are leaving school with scant job prospects and an expensive housing market, not to mention uncertain economic conditions.

Once they're out on their own, one of the best financial moves they can make is to set themselves up with the right banking package, says Rob Carrick, The Globe and Mail's personal finance columnist and a father of two. In his new book, How Not to Move Back in With Your Parents: The Young Person's Guide to Financial Empowerment, he provides the Boomerang generation with specific examples on how to handle debt, saving and budgeting, the ABCs of investing and buying a home. ( Read an excerpt from his book here.)

When it comes to bank accounts, something everyone has, the trick is to avoid costly fees and unnecessary products, Mr. Carrick says. That might sound obvious, but you would be surprised at how many people – and not just young ones – overpay for their everyday banking.

If a bank tries to sell you something, he suggests you ask yourself whether you really need it and if so, hunt around for the best price. "The more aggressively the bank sells something, the more skeptical you should be about buying it," he says.

Mr. Carrick spoke with The Globe about his new book and what moves young adults can make to get a good financial start in life, plus how their parents can help.

Q.What do you feel is the biggest financial challenge facing young people today?
A.It is harder to get a foothold into the economy – the cost of a post-secondary education is skyrocketing and it is tough to get a first job. So people are building up huge debt to get into an iffy workforce.

Q. Do you believe it is too easy for young adults to get a credit card?
A. Categorically yes.

Q. Given that young adults rarely have a lot of money, why do banks promote credit so heavily to them?
A. To train them to be enthusiastic credit-card customers. Banks want people to get exposed to credit and learn to use it – a lot. The idea is that they will build up some small spending as a student and then spend and borrow more. As they get older they will perhaps then get a mortgage or a line of credit. It is all about building a dependency. So they pitch the credit card as a tool for them to use. When handled properly, it can be.

Q. Should parents get their university or college-bound children a credit card?
A. Credit cards have no place in a student's wallet. They are a debt trap. There are a minority of students who can handle having a credit card and paying it off, but there are too many people out there who do not understand that this is just a way of delaying paying for something.

Q. If not with a credit card, what is the best way for parents to help kids cover emergencies?
A. A great way to get money to a student is through an online money transfer. You can just take the money right from your own bank account and put it into your son's or daughter's. You do this on an as-needed basis.

Q. Most banks offer students free banking packages. What should young adults focus on when they are looking for a permanent place to bank?
A. Students should give a lot of thought to no-fee online chequing accounts. Those are obvious ones for today's web-savvy young adults.

Q. You can save a lot of money with no-fee chequing accounts, like the ones offered by ING and PC Financial. Why are they not more popular?
A. I don't think they can compete with the marketing machine of the big six banks. In Canada, free banking has not been the huge success it could have been.

Q. If you go with a regular banking package at a big bank, what are some guidelines for choosing the best package?
A. You want the most transactions for the lowest cost. People say that all of the big banks are the same but when it comes to chequing accounts they are not. There is a lot of difference in how much you can save.

Q. In your book, you dismiss the notion of friendly staff as being a reason to choose a bank. Why?
A. Today's young adults don't go into banks. I am a 49-year old who goes in once or twice a year and that is under duress.

Q. What are some of the biggest banking blunders that young people make?
A. Not paying attention to your costs. If you don't have the right package, you could end up paying extra fees for things like too many debit transactions. I think bouncing cheques is a really dumb mistake. Last-minute bill payments is another bad one – you need to pay your bills at least 48 hours in advance or you will be considered late. Another one is being careless with your PIN – you have to keep that private and separate from your card and change it often.

Q. You have kids - what is the most important financial lesson that you try to instill in them?
A. The most important lesson is saving. My 17-year-old is working now and I am trying to encourage him to save for university or college and also for his wants and needs. And it is not all on the kids. Society bombards them with this message that you need to buy and that you are happiest when you are spending money – they are trained to be consumers. So you are fighting that, as well as their inexperience.

This interview has been condensed and edited..

Today's grads have it tough. But are there obligations when returning to the family nest? To weigh in, take our poll.