Financial Planning in Your 20s: The Moves That Actually Matter

The most common thing I hear from people in their 30s and 40s is some version of "I wish I had started earlier." The second most common thing I hear from people in their 20s is "I'll worry about that later." Those two sentences are connected, and the gap between them costs real money.

The good news is that you do not need to have everything figured out in your 20s. You just need to do a few things right. The math of compound growth means that a modest amount saved early is worth far more than a large amount saved late. A $10,000 TFSA contribution at age 25 is worth roughly $43,000 by age 65 at a 7% average return. The same contribution at 45 is worth about $11,000. Same money, different timing, four times the outcome.

Start With the TFSA

For most Canadians in their 20s, the Tax-Free Savings Account should be the first account you contribute to. The reason is simple: you do not know what your income will look like in 10 or 20 years. The TFSA gives you flexibility. Withdrawals do not affect your taxable income, there are no penalties, and the contribution room comes back the following year.

As of 2026, the cumulative TFSA contribution room for someone who has been eligible since 18 is substantial. If you have never contributed, check your limit through My CRA Account and start filling it.

The RRSP is also important, but it is most valuable when you are in a higher tax bracket. If you are earning $50,000 a year in your mid-20s, the tax deduction from an RRSP contribution is worth less than it will be when you are earning $90,000 in your late 30s. Build RRSP room now, use it strategically later.

Build an Emergency Fund Before You Invest

Three to six months of living expenses in a high-interest savings account or TFSA. This is not exciting, but it is the difference between staying invested during a rough patch and panic-selling when your car needs a new transmission. Financial plans that depend on everything going right are not plans.

The One Thing That Matters More Than Anything Else

Your savings rate. Not which ETF you pick. Not whether you use a robo-advisor or a discount brokerage. The percentage of your income you save and invest consistently over time is the single biggest driver of your long-term financial outcome.

In your 20s, aim to save and invest at least 15% of your gross income. If that is not possible right now, start with whatever you can and increase it every time your income goes up. Automate contributions so they happen before you have a chance to spend the money.

Avoid These Common Mistakes

Lifestyle inflation. Every raise should split between upgrading your life and upgrading your savings rate. If 100% of every raise goes to spending, you will always feel like you do not make enough money.

Ignoring employer matching. If your employer matches RRSP or pension contributions and you are not taking the full match, you are leaving part of your compensation on the table. That match is an instant 50% to 100% return on your contribution.

Treating your TFSA like a savings account. A TFSA holding cash in a bank is earning 3% to 4%. A TFSA invested in a diversified portfolio of index funds has historically returned 6% to 8% annually over long periods. In your 20s, with decades of runway, your TFSA should be invested, not parked.

You Do Not Need a Financial Planner Yet, But

Most people in their 20s do not need a comprehensive financial plan. They need a savings habit, a TFSA, and a simple investment approach. What you do need is to understand how the decisions you make now interact with the ones you will make later: RRSP room you accumulate now, contribution history that affects your CPP, and habits that will be very hard to change once you have a mortgage and kids.

If you are in your late 20s, earning a meaningful income, and feeling genuinely uncertain about whether you are on track, that is exactly the right time for a one-time financial review. Not a product sale. A plan.

Freehold Financial Planning is an advice-only, fee-for-service financial planning practice based in Windsor, Ontario, serving clients across Canada. This article is for educational purposes and does not constitute personalized financial advice.