Why Haven't You Started Saving?
I find that people of all ages, but more often younger people, often take on a complacent mentality around saving, and don't recognize how important it is to start as soon as possible. There are common excuses like "I can't afford it," "It's too early to start saving for school/a house/retirement," or "I don't really have anything to save for right now." Well, let me dispel those myths right now: if you have the luxury of a computer or smart phone, (meaning you are reading this right now) then obviously you can afford it; it's never too early, I started when I was sixteen; and there is always something to save for, because you have no idea what is around the next corner.
I find that the curriculum that our public school system has put together leaves a lot to be desired when it comes to teaching financial management. How many young University students have you heard of who rack up too much credit card debt without understanding the consequences? Or young couples who are looking at buying their first home and have no idea how to finance it? And how many high school grads do you think understand how to file their taxes solo? That is perhaps for another conversation...
What I want you to do is consider what you can do right now to make a difference in your financial present and future. May I suggest beginning with the below options:
1. Make saving goals. Before you even start putting money away, it is good to know what you are saving for. Are you saving for post-secondary education? Your first house? A round-the-world adventure? Or just for a rainy day? This helps put things in perspective and gives you some accountability to that savings account.
2. Make an appointment. You may not know what saving product is right for you. Unless you can spout off the full titles of acronyms like TFSA, RRSP, DISA, and GIC, and know all the ins and outs of managing your own investment portfolio, you probably need some help. Sit down with someone you feel comfortable with who can answer your questions. A Financial Service rep at your local bank branch is usually an easy place to start. They will have the experience and the resources to determine what type of saving is right for you. Do be wary of those advisers that push too much though. They are there to help, but also to make their targets, and you want what's right for you, not what's right for their weekly numbers. (Biased hint: start with a TFSA. They are the easiest to contribute to and withdraw from without tax consequences and good for shorter term goals, like buying a car or paying tuition. But that is just the opinion of one person who had a very short lived banking career. I really prefer writing.)
3. Be realistic about what you can regularly set aside. It is usually easiest to budget on a monthly basis. So determine what your monthly expenses are, and based on your current income, what difference is left over. The link below to the CIBC Budget Calculator is an easy way to do this calculation. Even if that number looks small, you could probably cut out a few extraneous expenses every week and find a little excess to put away each month. Many savings accounts have minimums of only $25-$50/month, and even at that rate, whatever you set aside will be more than cobwebs and dust bunnies.
4. Keep track of your expenses. Too often I hear people say "I rarely check my bank statements" or " I have no idea how much I spend on food/gas/shopping every month." Not paying attention to what you're spending could be the first step to going into more debt than you can handle, especially if you are using credit cards. Debt is not a bad thing, it's too much of the wrong debt that is dangerous. Start taking note of what you are spending and make a budget for what you should be spending, at least for your main expenses like your rent, phone, and food. Make a habit of checking your bank account on a regular basis. Most banks have apps for that, making getting your financial updates simple and accessible. Cut out unnecessary expenses as well. Are there any monthly subscriptions or memberships that you aren't using that you could cancel? Have you been eating out too much? Small changes could yield much bigger savings than you may have known are there.
5. Make better habits. We would all love to live the fast and hard lifestyle, but it can really add up. Those daily vices like the $4 lattes and eating out for over 50% of your meals in a week is draining on your bank account (not to mention your health). So are those "harmless" window shopping trips that end in a frenzy of impulse purchases. Managing your money goes hand in hand with managing your lifestyle. Beware of getting caught up in living beyond your means, because that lack of means will catch up to you. And if you are staying within your financial league, think of what you could do with extra savings just by changing a few habits. For example, a $4 coffee 5x/week for an entire year is $960. That's a decent chunk of cash that could be set aside for something that will enhance your life for longer than a caffeine buzz. So, get yourself a coffee maker and a cookbook, carve out a little more time for your meal planning and a little less time for binge purchases, and put that $20/week into a piggy bank.
6. Educate yourself. Read articles like this and strike up conversations with your mentors about finances. People shy away from talking about money, as it can be a very private topic that is psychologically linked with how we perceive our worth, but you can miss out on invaluable lessons from business owners, professionals in the finance field, and even your peers. Utilize the tools out there that are provided by financial institutions, like CIBC's Retirement Calculator, or the BMO Mortgage calculator (see links below). Most big banks have online resources like this to help put into perspective how important it is to save for those big goals, starting now.
CIBC Retirement Calculator
BMO Mortgage Calculator