According to Stats Canada, personal savings in Canada averaged 7.76 percent from 1961 until 2020, reaching an all time high of 28.20 percent in the second quarter of 2020, during the pandemic. Have your savings increased in the past year? Whether you’re saving for retirement, a down payment on a home, or your kids’ higher education, these five strategies will help get your funds to where they need to be.
1. What Are You Saving For?
Determine your short-term, mid-term and long-term goals.
For example: Emergency fund as a short-term goal; Down payment as a mid-term or long-term goal; Retirement as a long-term goal.
TIP: Stock your emergency fund with at least three-six months’ expenses before ramping up on other savings goals!
2. Set a Timeline
How much will you save and when will you need it? Be as specific as possible about your timeline, so that you can work backwards to set a plan in order to get there. If you have a roadmap in place of where and when you want to get there, it will be easier to get to your destination.
For example: By 2026, I will save $35,000 for a down payment on a home.
3. Build Your Savings Plan
Calculate a monthly savings amount for each goal. Once you know what you want, and when you want it, you can set up that plan to ensure you get there.
Example: Saving $583 per month (or $135 per week) will get you $35,000 in five years for your downpayment.
4. Create a Budget
Add the total monthly savings goals to your budget. If it’s more than you can afford, consider making a few cuts, adding extra income or choosing a higher-yield savings vehicle.
5. Choose the Right SAVINGS TOOL
A traditional savings account isn’t your only option when it comes to growing your savings. Find out which savings tool will get you the most bang for your buck!
1. Short Term Savings Vehicles
High-Interest Savings Accounts → Pays more interest than traditional savings accounts.
GICs (Guaranteed Investment Certificates) → Must leave funds in for full-term to avoid early withdrawal penalties in most cases.
Tax-Free Savings Account (TFSA) → This is my favourite vehicle because you can earn tax-free interest on savings up to the contribution limit. Your savings can be placed in a high-interest savings account or GICS, or invested in mutual funds or ETFs.
2. Saving for Higher Education
RESPs (Registered Education Savings Plan) → Must be used for educational purposes only. The government will match contributions 10-20% depending on your income.
3. Saving for Retirement
RRSP (Registered Retirement Savings Plan) → Lets you make regular contributions and earn compound interest as you save for retirement.
Need help saving for your goals? Give me a shout, and I would be happy to refer you to an excellent finance professional who can get you started or help you in your journey.