5 Tips to Save Efficiently

We know that money does not grow on trees and there are many reasons to spend it! So we have no choice but to set medium- and long-term goals and make a plan to achieve them. Here are a few tips to help you get there.

1. Determine your projects and your goals

Ask yourself what you want. To build an emergency fund? To buy a house or a cottage? To take a sabbatical year? To go back to school? To save for retirement? You must determine your savings goals realistically by taking your budget into account.

2. Set up automatic transfers

Setting up automatic transfers is the simplest and safest way to save. It is much easier to save $50 per week that way, than to transfer $2600 all at once at the end of the year. By setting up automatic transfers based on your budget, you make the decision once, and that is it.

If, at any point, money is tight, you can reduce the amount of your transfers for a while and increase it later. And if your finances improve, you can increase the amount! To find out in what type of account you should invest your savings, consult the following web pages:

• Why invest your savings in an RRSP?
• Why invest your savings in an TFSA or FHSA?

3. Start saving early

For long-term projects, such as retirement, it is really worth starting to save as early as possible, even if the amounts are small. You will be able to invest your savings for longer and benefit from compound interest. Compound interest is when your money works for you because interest is added to the interest you have already earned. It is like a snowball that you roll around and gets bigger.

Let's look at an example that illustrates this well:

Let's say you start investing $150 per month at age 35 and you do so until age 65 at an average interest rate of 5% per year. Over time, you will have saved $54 000, and that investment will be worth more than double that amount by the time you turn 65, that is, just over $122 000.

If you wait until age 45 to start instead, you will need to invest $300 per month instead of $150 to achieve the same result. In total, you will have saved $72 000, which is $18 000 more than in the previous example. You can create your own scenarios using our compound interest calculator.

4. Become a member of your workplace pension plan

For retirement, if you can become a member of your workplace pension plan, do it! When your employer contributes, it is a significant boost for your future.

5. Use a tax refund for your savings

If you receive a tax refund or unexpected income, such as an end-of-year bonus, try to resist the temptation to spend it. Save it, or at least part of it!

Keep yourself motivated by making a balance sheet

You now know more on the ways to save. The biggest challenge is keeping yourself motivated. A good way to do so is to make a balance sheet at the end of each year to see the evolution of your savings. You will certainly find that it is reassuring to have some money set aside for your retirement and your projects.

Do you want to know what your investment options are for growing your savings? Consult the How to make money thanks to your savings? web page.