How Do I start Saving?

How do I start saving my money?… I get asked this question a lot from young Canadians. Saving money can be very hard for some people who have accumulated debt such as student loans, car loans, credit cards, and other consumer debt. The average Post-Secondary school graduate will end up graduating with roughly $30,000 to $40,000 worth of debt.
From my experience most recent grads are excited about entering the real world, the stress of school is gone and it’s time to start making some real money, the only unfortunate thing is for recent grads is the pressures to find a job in the field that they have studied for the past 4 years.

Most recent grads are resulting too find part-time or full-time jobs outside of their field of study until job openings appear in the industry where they intend to begin their career. The average post secondary school graduate will make anywhere from $24,000 to $35,000 their first year in the work force, as mentioned above most of the money that you make will go towards paying off any outstanding loans, lines of credit, or credit card debt.

Now we go back to the original question….How do I start saving my money?

One of the most important parts of your budget is saving for your future. It doesn't matter how much, the important thing is to get started, even a few dollars saved each month can add up over time.

The standard guidelines to saving is to save at least 10% of your pay.
Example: If you make $2,000 per month you should try and save $200 per month
If your income changes each month, adjust your savings accordingly
Build Savings into your monthly budget, it can help you stick to your plan.
Each year challenge yourself to reach a higher savings goal
Save more if your pay goes up or you get a bonus at work
If you have a lot of debt try saving a smaller amount until you’re debt-free.

Where can we start saving?

Most Canadians have a  standard checking and savings account, the checking account is where we put our paychecks and any other earned income aside, our savings account is typically where we put our money aside and expect it to grow which we can use for a rainy day or emergency. When we put money into our savings account we expect that money to grow, but little do we realize the banks are only giving us 0.25% on every dollar that we have inside out savings account. Not the typical return most Canadians are looking for.

My Suggestions

Open a TFSA (Tax Free Savings Account) where you can choose a high interest savings account that is earning you 1.35% to 2.00% interest on every dollar OR choose a fund that will invest you’re your money into markets/industries specific to your risk tolerance with a higher growth potential then a high interest savings account.

Start a PAC agreement (Pre-authorized check) which allows the financial company to transfer a specified lump sum of money of your choice each week into your TFSA from your checking account, this way your money is working for you and each week you wont have to worry about setting aside money because it is automatically set aside through the PAC agreement. Setting aside at least $20 per week with accrued interest can help you become financially stable even if debts are still outstanding.

Finally, When RRSP season comes around typically from January until Midnight March 1st, if there is any unused income inside your TFSA, open an RSP (Registered Savings Plan) which will allow you to save for your retirement and put any unused capital from your TFSA into the RSP tax free. While you can contribute to your RRSP at any time during the year, many Canadians wait until January and February to take advantage of this tax break.

In closing, don't forget: saving is something you do for your future. How much you save depends on your situation. It's a question of finding the right balance for you.