Given the high cost of living, do you ever wonder how others can manage to save, when you feel like you are scrambling to make ends meet every month?
According to a survey by RateHub.ca that looked at Canadian savings habits:
- Eighty-seven per cent of Canadians manage to save at least a little money every year
- Fifty-one per cent are saving for retirement
- Other saving priorities include emergency fund (36 per cent), major purchase (20 per cent), education (16 per cent) and special occasion (13 per cent)
- Fifty-nine per cent understand how Registered Retirement Savings Plans (RRSP) work and are familiar with your benefits
“Saving is an essential part of achieving your financial goals, but it is important to map out short, medium and long term goals. That means whatever life stage you are saving for- whether it be buying a home, saving for your children’s education or for your own retirement, you will have to rely less on credit, if at all, when the time comes,” says Jeff Schwartz executive director, Consolidated Credit Counseling Services of Canada.
“In addition to some of your major savings goals, always make sure that you set aside some money each month in cash to go towards emergency expenses. At some point you’ll need money in a hurry, which is when a lot of people have to turn to credit. You can avoid that by planning ahead,” says Schwartz.
Here are some tips on how to develop better savings habits:
Identify short, medium and long term goals
When you are establishing your savings strategy, identify different goals. It’s possible to save for multiple goals at once, but you need to prioritize.
For example, let’s say you want to go on a holiday this year; you’d like to buy a home in the next few years and you’d like to start on your RRSP. You need to first determine the dollar amount you need to attach to each of these goals.
Once you’ve done that, work to establish a timeline to address each of those goals. How much do you need to allocate each month to each of those savings goals in order to reach them at the required time?
Free up cash flow
If your number one complaint is that you don’t have any extra money to put into savings, you’ve got to retool your budget so that you can have some cash flow so that you can get going.
Are debt payments eating up your income? Consider consolidating your debts, which will both free up cash flow and pay down your debt more quickly.
If the habit of spending beyond your means has got your cash flow running dry, it’s time to change your attitude to favour saving over spending.
Maximize your savings power
Savings isn’t just about putting money aside; it is also about getting more mileage out of your money to grow your savings.
For example, when you put money in your RRSP, you can choose a variety of investments that will grow tax-free over time, until you withdraw them. An exception to that is if you withdraw those funds to use for a down payment on your home or to fund your education. Even though you are ultimately saving for retirement with an RRSP it can help you address other savings goals at the same time.
Another bonus is that you generally get a tax refund with your RRSP contribution, which you can use to pad your other savings accounts.
Would you like to start saving, but are spending all of your income paying off debt? It’s time to come up with a plan that will let you do both. Call us today at 1-888-294-3130 or check out our free online debt analysis.