You’ve probably heard stories about how people have been able to save astonishingly large amounts of money, simply by throwing their spare change into a jar they keep on their dresser at the end of each day. With the rise in use of electronic payments these days, this approach to saving may now be a thing of the past. Still, this does draw attention to the idea that regularly saving, even just a little bit at a time, can add up to some serious cash over the long term.
In our latest Saversodes video, Heather explains how after years of struggling to save, she realized that she needed to get serious about saving. After all, she had dreams far beyond just simply getting by each month. She wanted to travel and see other parts of Canada, and she needed to do more to make sure she could afford the kind of retirement she wanted.
To her credit, Heather found savings success through a time-tested approach–she started to pay herself first. Heather started small by setting aside just $50 from each paycheque, but even with this relatively minor amount, her savings started to grow. Watch Heather’s video as she explains how by paying herself first, she is now on track to achieve her saving goals.
Tips to help you become a successful saver
When it comes to saving, everyone has their own priorities. But if you’re looking for ideas to help you boost your savings, here are some suggestions that might work for you:
Set up a dedicated savings account
Like Heather, you might consider setting up a dedicated savings account. With an Oaken Savings Account, for instance, you’ll receive one of Canada’s highest daily interest savings rate. You’ll also enjoy the peace of mind that comes with knowing that your savings are eligible for CDIC insurance coverage.
While you may think that a savings account is a bit outdated in our high-tech world, don’t underestimate just how flexible a savings account can be. Check out this Oaken Blog article discussing 5 additional benefits of a high interest savings account.
Guaranteed Investment Certificates (GIC)
If you’re saving for a longer term goal and don’t require your savings right away, a Guaranteed Investment Certificate (GIC) might be a good choice for you. By using your savings to invest in a GIC, you can earn a higher guaranteed interest rate than a typical savings account.
Oaken offers some of Canada’s highest GIC rates, with long-term GICs that range from 1 -5 years to help you maximize your savings. If you think you may need to access your savings sooner, we also offer short-term GICs ranging from just 30 days up to 1 year. For the ultimate in flexibility, we even offer a cashable GIC that lets you access your funds in as little as 30 days.
If you’re unfamiliar with GICs, be sure to read this Oaken Blog article discussing GICs and how you can make GICs part of your overall saving strategy.
Registered savings and tax-free savings plans
You can also save using a Registered Savings Plan (RSP) or a Tax-Free Savings Account (TFSA). These two programs were developed by the government, and provide specific advantages for individual savers.
Setting funds aside for your retirement is the obvious reason for contributing to an RSP. But for those who qualify, RSPs can offer additional advantages. For example, you may be able to use your RSP as part of the down payment on your first home, or even to help pay for your return to school. See our Oaken Blog article for more information on additional ways you can use your RSP.
However, a major drawback of an RSP is that other than some specific uses as noted above, it's difficult to access the funds in your RSP. It can also be potentially costly, as you'll be required to pay taxes on money you withdraw from your RSP. On the other hand, a TFSA was designed to help you save for any objective, and you're not required to pay taxes when you transfer money from your TFSA.
Nevertheless, one drawback common to both RSPs and TFSAs is that you're limited as to how much you can contribute each year. If you have extra funds that you wish to add to your savings, you can hold non-registered GICs outside of an RSP or TFSA. Non-registered GICs allow you to continue to benefit from the guaranteed return of GICs, even if you have used all your available TFSA or RSP headroom.
Create a budget
Everyone has likely heard the old adage “a penny saved is a penny earned”. Although, now that the penny has been decommissioned, this saying might need to be updated to “a nickel saved is a nickel earned”. Either way, the sentiment is still valid, and reinforces the importance of watching how much you spend, and tracking where your money goes.
In a recent Saversodes video, we met Jesse who shared how his father’s advice had helped him become an effective saver. For tips on how you can create your own budget, click on this link to hear what Jesse had to say about his spending and budgeting habits.