Saving money: pay yourself first

In the spending section, you practiced creating a spending plan. Did your fixed expenses include any savings?

If you’re just getting started in the real world, saving may seem impossible. You may have rent, a car payment, a cell phone bill and entertainment expenses. You’d like to save, but there’s just no money left at the end of the month and that’s the problem: many people save what’s left over instead of making savings the first item in their spending plan.

Always pay yourself first

The first “bill” you should pay every month should be to yourself. So, before you give your debit card a workout at the movies or the tech store, set aside a consistent portion of your paycheque or allowance to pay yourself.

How to pay yourself first

The best way to develop a savings habit is to make the process as simple as possible. Make it automatic. Your bank may be able to automatically take a few bucks off your paycheque before you even see it. Start with $5 or $10 every week or even opt to set aside a percentage of your overall paycheque. You should increase the amount you save, as your income grows. Out of sight is out of mind and you will be surprised at how quickly that money will add up. If you don’t develop the saving habit early, there will always be reasons to delay. Paying yourself first encourages sound financial habits.

Set a goal and go for it

Saving works best when you know what you’re saving for. Set a goal. Set a time frame. Be realistic and be flexible because your goals may change.

The best financial goals are both specific and measurable. So if you’re really thinking ahead—to,

Chequing accounts—the pros

These accounts are useful for depositing cheques and paying bills regularly, either electronically or using cheques. You can also access your money easily and you’ll be insured against the possibility of loss up to $100,000 by the Canada Deposit Insurance Corporation (CDIC).

Chequing accounts—the cons

You usually have to pay service fees for things like withdrawing money from an ATM (bank machine) and for debit card transactions. Tip: You can sometimes avoid these charges by ensuring you have a lot of money in your account (often about $5,000) or by paying for a low-cost account that allows for just a few transactions. Chequing accounts pay little, if any, interest. say, retiring after your long and successful career— instead of saying you want “enough money to be comfortable,” think about how much money you’ll actually need to retire. Maybe your specific goal will be to save $1,000,000 by the time you’re 60 years old. As you start your career, you may find that goal is way too high—or too low. Look at how much money you can put aside without making your life too difficult and plan accordingly. Setting priorities will help you achieve your goals.

Some examples of specific financial goals:

• Pay off your student loans by August 2026. • Save $5,000 to purchase a used car by June

2021. • Save $2,500 for an emergency fund within the

next two years.

Emergency fund

Emergencies are going to happen every now and then—like, say, dropping and smashing your phone. It’s always a good idea to plan for emergencies by having a reserve fund ready. Whether you’re still at home or are about to move out and live on your own, having a rainy day fund is a good idea. Use your savings plan to put aside some money regularly, just in case, for emergencies.

It is important to plan for financial emergencies. It may not be a perfect plan but having no plan would be much worse. As the name implies, an emergency can be unexpected and can happen to anyone at any time. A cushion of three to six months’ expenses will help you in case something unexpected happens.

Savings accounts—the pros These accounts are specifically earmarked for savings. You’ll often earn at least a bit higher interest than a chequing account pays. You’re also insured against the possibility of loss up to $100,000 by the Canada Deposit Insurance Corporation (CDIC).

Bank on it

You could always toss your spare change into a piggy bank or stash bills in your sock drawer, but you’re far better off opening a bank account if you don’t already have one. There are a ton of financial institutions, including banks, credit unions and trust companies that offer a variety of services, with different fees for each service. Opening a bank account is easy. Walk into any bank and speak to a customer service representative. You will need two pieces of identification (such as a driver’s licence, a passport or a Canadian birth certificate). If you’re under 18, you may have to bring a parent along and get their name on the account too. When you set up a bank account, you’re usually asked whether you want a chequing account or a savings account. When it comes to choosing a bank account, explore the different options Canadian banks offer. Student accounts usually charge very little (if anything at all) in the way of fees. Take the time to do your research on all the options available to you.

Savings accounts—the cons

Your money isn’t as easy to access when it is stored in a savings account and you usually can’t pay bills or write cheques. There may be fees if your account has less than a certain amount in it. There will likely be limits on the number of withdrawals you can make.