7 tips to help you make saving money a regular routine.
Are you saving enough? If you’re like a lot of Canadians, you may not be. According to a BMO Household Savings Report, 19 per cent of Canadians didn’t save a single cent in 2014, and 40 per cent don’t feel like they are stashing enough away to meet their goals.
That’s the sobering news. The good news is, it’s never too late ― or too early ― to start saving for the future. Follow these seven tips to start saving more today:
- Understand the power of habit: Charles Duhigg, author of The Power of Habit: Why We Do What We Do in Life and Business, says there is a three-step neurological process to creating a habit. The process includes picking a cue, rewarding yourself and executing your routine. For example, you are more likely to save regularly if you set reminders for yourself (such as a calendar alert on payday), choose a small reward that motivates you to continue (for example, an episode of your favourite show), and commit to your plan in writing.
- Save at least 10%: It’s generally a good rule of thumb to try to set aside a minimum of 10 per cent of your gross annual income, a theory popularized by The Wealthy Barber. For example, if you earn $1,500 biweekly and take home $1,000 after taxes and other deductions, you should be saving $150 per paycheque, not $100. Keep in mind, your age is a big factor in your savings plan. The older you are to start saving, the more you should be setting aside. If you are over 30, consider aiming for 20 to 30 per cent.
- Work it into your budget: Instead of paying all your expenses and then seeing what’s left over for savings, make savings a priority. How, exactly? Treat it as a main expense: Move money into your savings account before spending discretionary income. To make it easier, consider speaking to your financial planner about setting up automatic withdrawals. Plus, Industry Canada’s My Expenses Calculator can help you track your expenses and make small changes so you can save more.
- Clear your debt: Whether you carry a credit card balance, student loans or car financing, your hard-earned cash is being wasted on high interest rates. For example, if you have $3,000 in credit card debt at an interest rate of 19 per cent, it could cost you hundreds of dollars a year in interest alone. Be aggressive in paying off your debt so your money can start earning interest for you instead.
- Get an automatic savings plan: There are products that make it easier for you to save automatically, and earn more interest while you’re at it. For example, the BMO Savings Builder Account rewards you with bonus interest for making saving a habit ― when you sock away $200 or more a month, you’ll benefit from a higher interest rate.
- Set a goal: It helps if you have a tangible goal in mind, such as saving for a trip, education, new car or retirement. You can even nickname different savings accounts for different goals to make it a little more enjoyable.
- Have a plan: Thirty-two per cent of Canadians polled for the BMO Household Savings Report say they have less than $10,000 in savings. One in three blames their poor savings on the lack of a plan. If you have a financial planner, you might want to sit down with them for help to determine your goals and create a plan to reach them. Not sure who to speak to? Locate a financial planner near you.