There’s no two ways about it: the earlier you start saving, the more money you’ll end up with. The longer you wait, the harder it gets.
If that logic isn’t enough to convince you to change your financial habits, here are 4 compelling reasons why you should start investing in a long-term strategy right now.
You’ll be able to afford life’s big moments.
Consider this: if you get a $5 latte every day before work, you’re probably spending about $25 every week for your daily caffeine hit. That adds up to around $100 a month or $1,200 a year on coffee alone– and that’s assuming you got the smallest size available and didn’t use oat milk.
Although it might seem too obvious to be worth mentioning at first, the fact is that if you’re actively putting money away each month, you’ll have less to spend on unnecessary coffees, take-out deliveries and spontaneous shopping trips. However, foregoing some of those daily pleasures in the moment will allow you to save up for that future mortgage, your dream wedding, your next car or even going back to school like you’ve always wanted to.
Setting up automatic deposits are more effective (and easier to stick to) than aspiring to meet a monthly budget and relying purely on self-control to fill up your savings accounts.
Financial surprises won’t catch you off guard.
Doesn’t it seem like cars and furnaces always break down at the worst possible time? Or that when you receive some bad news from the doctor, a lay off is suddenly also imminent? Unexpected emergencies like malfunctioning vehicles, car accidents, unemployment, or a loved one falling sick can easily become a major drain on financial resources if you’re not prepared.
As arguably one of the most important reasons to have a savings account, building an emergency fund will provide the financial buffer you need to stay afloat in times of need without taking out loans or going into debt. Even a small (but regular) contribution to a TFSA each month can go a long way!
Retirement is inevitable.
With a government pension plan and universal healthcare, Canada has always been a pretty good place to spend your retirement years. Unfortunately, that might be beginning to change. With housing costs on the rise coupled with longer life expectancies, relying on the CPP and OAS to fund your retirement is unlikely to be sufficient – especially if you really want to enjoy your golden years.
The cost of senior housing in BC ranges anywhere from $1500 to $6000 per month– and that’s just for accommodation. If you aren’t prepared for this cost, it can be a cause of a lot of stress for your future children!
Though it might seem far away right now, the earlier you get started, the less you have to contribute in the long term. For example, if you started saving when you were 25 and put $3,000 away each year in a tax-deferred retirement account for 10 years and then stopped saving entirely, by the time you reached 65, your $30,000 would have become more than $338,000 (assuming a 7% annual return). That’s without contributing a cent after 35. Not bad, right?
No job is ever completely secure.
The economy will always be in a state of flux due to various political and environmental factors over which you have no control. Have you ever heard of the saying “make hay when the sun shines?”; a healthy economy likely means gainful employment and it’s important to take advantage of the opportunity to put aside some emergency funds for a rainy (and potentially unemployed) day.
“Building an emergency fund should be reasonable and achievable. It offers a buffer between you and life’s surprises, and the knowledge that you have one will undoubtedly help to ease a stressful situation.” Brendon Coe, Credential Securities Investment Advisor at Interior Savings.
Unfortunately, you never know when you’ll have to face a round of layoffs in response to a national economic downturn or when prices for regular goods and services will suddenly shoot up. Canada does provide Employment Insurance, but more often than not it won’t be enough to sustain your regular lifestyle – especially if you have dependents, a mortgage or student loans to keep up with.
If you’d like to find out more about setting up a savings account or have questions about long-term saving strategies in general, get in touch with our Investment Solutions Centre.
Our financial experts are always ready to help!
Mutual funds and other securities are offered through Credential Securities, a division of Credential. Qtrade Securities Inc. Credential Securities is a registered mark owned by Aviso Wealth Inc.