Tax planning 101
It's the time of year when many people scramble to prepare their tax returns and vow that next year will be different. Unfortunately, in most cases, taxes are something that happen to us instead of something we plan for, especially among young people.
Fewer than eight per cent of young professionals aged 18 to 30 feel they are great at tax planning, according to a recent RBC Tax Planning Poll. That said, among those who currently attend or had completed college or university, more than 80 per cent believe that educating themselves about taxes and tax-saving strategies is important.
Young people looking for help
This reflects a need for tax advice geared at young people entering the workforce and starting to think about the future. "A good part of building a solid financial plan is including a solid tax-planning strategy," says Lee Anne Davies, head of retirement strategies at RBC.
If young people educate themselves about taxes early on, it will help them navigate the milestones heading their way, be it establishing a career, setting up a business, buying a first home, getting married or starting a family.
"For most of us, it's not the most interesting topic," says Davies. "(But) every dollar counts, and keeping more money in your pocket can help you focus on your current financial priorities while preparing for the future."
The survey found men are more confident in their tax-planning abilities than women. Only eight per cent of women said they were great at tax planning compared to 12 per cent of men.
"We know women much more than men are responsible for managing household finances. There's also more women becoming lone parents," says Davies of the importance of both sexes boosting their tax knowledge. "The first step is taking the time to educate yourself and understanding the rules and how you can take advantage of them."
Call on experts for tax and financial advice
Of course, you don't have to do it alone. A smart strategy is to have a financial adviser to help navigate the financial and tax planning process. The two go hand in hand, and the survey reveals that three out of four young professionals want to start investing for their retirement. Half of the 24 per cent who don't feel the need to start investing today admit they would like to but can't because of their current financial situation.
No doubt when one is bogged down by student loans and other debts, saving for retirement and planning a tax strategy seem a little foreign. However, Allison Marshall, a financial advisory consultant with RBC Wealth Management Services, in Toronto, says most financial advisers want to be there from the beginning to help young people plot those early years.
"It's about establishing good habits early on," she says of the juggling act of paying down debt, budgeting and saving for the future.