How to Save for Your Projects or Retirement?

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Plan to save in your budget

When you can afford it, plan to save in your budget. Savings make you more independent and reduce your stress. The money you invest generates interest and allows you to carry out your projects. If you do not have any specific projects in mind, that is okay. Having money aside is like buying yourself freedom.

Set up an automatic transfer

Another easy way to accumulate savings is to set up an automatic transfer for each pay. You make the decision once, and do not need to think about it again for subsequent pays: your money almost accumulates on its own! Tell yourself: I pay myself first!

Start saving early

Ideally, you should start saving early. Why? Because you can invest your savings for a long time and benefit from compound interest. That 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 that gets bigger all the time because the snow sticks to itself.

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

Suppose you start saving $300 per month at age 25 and keep doing it for 10 years. At age 35, you stop saving, but compound interest continues to accumulate at an average interest rate of 5% per year. By age 65, you will have a little over $200 000, while having taken only $36 000 out of your pocket.

Someone doing the same thing as you, but starting to save at age 45, would not achieve the same result at all. At age 65, that person would have about $75 000, which is much less, because his or her money would have been working for him or her for a shorter period of time.

If you want to create your own scenarios based on different amounts, use the compound interest calculator.

If you want to be even more efficient with your savings, place them in a tax-free savings account (TFSA), a first home savings account (FHSA) or a registered retirement savings plan (RRSP). Find out why it is worth it on the following web page.