Saving is one part of the budget that is often overlooked or left out altogether.
What things do you need or want to save for?
Do you have room for savings in your budget?
Saving money should be a planned part of your budget.
If you only save money when you have a few extra dollars from your paycheque, then it is unlikely your savings will ever grow.
Why do people save?
There are two main reasons why people save:
- To provide financial protection for themselves and their family
- In the case of an emergency or unexpected expense
- For security for the future (RRSP’s, RESP’s, other investments)
- To reach GOALS
- Things you NEED to buy during the year such as car insurance or tuition fees
- Things you WANT to buy such as a newer vehicle or a bigger home
Helping you save
Setting money aside for savings can be very difficult at times.
Often there are too many demands on our money and there is not enough to go around. Here are a few ideas on how to make your savings plan easier to follow:
- Set goals. Knowing what you are saving for makes it more likely that you will save. See Understanding Your Expenses for details on how to calculate what savings you will need to cover occasional expenses.
- Plan for savings. Try to take your savings from the top of your income, not the bottom. Deposit some savings when you get paid, not from the money that is left over. Pay yourself first!
- Set up a separate savings account. Open a special account for savings and make regular deposits into it. For example, if you are saving for a new car that you want to buy in a couple years, open a special “car account” for your deposits.
- Make regular deposits into your savings account. Set up an automatic withdrawal into your savings account if you can – it makes it less likely that you will skip payments.
- Shop around for the best savings account for you. If you are saving for the long-term (more than 2 years), choose a savings account that calculates and pays out interest frequently (monthly is most common). The more frequently interest is paid into your account, the faster your money will grow. Compare interest rates and watch for extra fees if you need to withdraw money.
- Take advantage of employer matching programs. Some companies will have a retirement savings-matching program. If you contribute into the company pension plan, they will match contributions up to a certain percent. Take advantage of these plans as they are an excellent way to build retirement savings.
Even having a small amount of money in savings will bring you some security and peace of mind. Do not rely on credit for unexpected expenses and emergencies as this money still needs to be repaid at some point and it may end up costing more in the long run when you add in the interest expense.