With an increasing number of young Canadians turning into boomerang kids and not being able to find a job during this economy, saving money is now more important than ever. According to the Globe and Mail, only 43 percent of young Canadians between the ages of 18 and 34 have started saving for retirement.
A recent Bank of Montreal survey indicated that young Canadians want early retirement, but aren’t actually saving for early retirement. 41 percent of young Canadians between the ages of 18 to 34 expect to retire early before they hit the age of 60.
Here are three money saving tips to help you or the young Canadian in your life to get started on that money saving journey.
Open up a TFSA
For the Canadian who may not be making enough money to render a tax deduction from a registered retirement savings plan feasible, opening up a Tax Free Savings Account is a great idea to get started with savings. Opting for a Tax Free Savings Account that holds e-mutual funds like the TD E-series is a good idea rather than picking a tax free savings account where the interest rate is barely keeping up with inflation.
With the Canadian government increasing the allowance of the Tax Free Savings Account by $500 to $5500, that means money can be kept in the Tax Free Savings Account and more money can be allowed to grow, sheltered from things like capital gains tax or interest income tax.
With the Tax Free Savings Account, time is on your side. At a 6.8% compounded growth rate, if one contributes just $100 a month from age 25 and continues to increase their savings according tot the schedule, by age 65 there should be enough for $1 million.
- ages 25 to 30, $100 per month
- ages 30 to 35, $250 per month
- ages 35 to 40, $500 per month
- ages 40 to 50 , $750 per month
- ages 50 to 65, $1,000 per month
Everyone talks about the latte factor and people are probably feeling “latte factored” to death, but it is worth mentioning (again).
That $3.80 latte/ mocha no whip with soy milk/ caramel macchiato that you get Monday to Friday? Well, that adds up to $1000 a year. That’s $1000 that you could be spending on something that matches more with your core values. If you value adventure and exploration, does a $3.80 latte that you indulge yourself with every morning match with this goal?
Don’t get me wrong, if you enjoy the daily indulges and the daily splurges rather than a bigger goal like traveling or a pair of Christian Louboutin shoes, then this latte/ no whip mocha/ caramel macchiato is not an issue. But if it something that you think you could live without and you would rather prioritize your money (which is essentially a symbol of our goals and values in life) to something more meaningful, then thinking consciously about where your money is really going is the key to success.
Spending your money on something you’re not interested in is analogous to spending your time and choosing a guy who has the same interests as you, is fun and playful but is emotionally unavailable and doesn’t fit in with your core values of wanting respect, trust, and intimacy in a relationship.
Pack Your Lunch
The same goes for eating out every day for lunch. Although it is a nice treat and a great way to socialize with coworkers to get to know them, it can really add up. Not to mention takes up a lot of time from your work day when you could be more productive doing something else.
Lunches at work can cost anywhere from $8 to $13 a day. This is even worse than the latte factor because it costs so much more! The lunch factor can set you back a whopping $2100 to $3400 a year. Of course, if you enjoy the socialization with your colleagues you get with lunch, you can compromise by eating out less (e.g. once a week) and tell people you are saving up for a down payment or paying down your debt, or even that trip to Thailand you’ve always been wanting to go to.
Although we make excuses for ourselves and say that there isn’t any money at the end the day, after all the bills are paid, for anything that we want and desire, there always is a way to look at the money you could be saving for something more inline with your goals and aspirations.
Bargainmoosers, what are some of your core values and goals and aspirations?