Make room in your budget for short-term and longer-term savings to help you reach your financial goals. It doesn’t matter how much you save at first. The important thing is to get started.
Know what you’re saving for
Many people start by building an emergency fund to cover unexpected bills and expenses (like a furnace that breaks down in January). Without these savings, you may have to borrow money to pay these unexpected expenses. And then you’ll need to repay that debt.
You can also put some money away each month to help you reach your short- and long-term financial goals. Some common short-term goals include vacations, new cars and weddings. Long-term goals could include a first home, a comfortable retirement or putting kids through school.
Set a monthly savings goal
Set a percentage of your pay or a dollar amount to save each month. For example, many experts suggest saving at least 10% of your pay. If your income changes each month, adjust your savings up or down. If you get a raise or a bonus at work, increase your savings. If you’re carrying a lot of debt, you might want to save a smaller amount until you’re debt-free.
If you’re saving for a specific goal, figure out how much you need to set aside each month. For example, if you’re saving $1,000 for a vacation in 6 months, you’ll need to start saving $167 a month.
Balance saving, spending and paying off debt: When Dave got a new job, he wanted to buy a new car. But he also knew he should start saving some of his pay each month. To see how he balanced these goals, read Dave’s story.
Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca