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December is a tricky month for saving money because of all the costs of the holiday season. January’s maybe a worse month because you have holiday credit card bills coming in. February is no good, either. In non-pandemic times, isn’t that the ideal month to head south for some sun?

Give me a month, and I’ll give you an excuse to spend money instead of putting it away for future use. In spring, you’re looking around at winter’s toll on your house and your yard and deciding what upkeep or renovations are needed. The summer months are bad for sure – you’re taking a summer vacation, and summer camp for the kids will cost a mint.

If you save when you have the money handy, you run the risk of never saving or not saving enough. Solution: Make saving automatic. Every time you and your partner are paid, have money transferred electronically from your chequing account to a savings and/or investment account.

This style of saving is called “pay yourself first,” and it’s basic personal finance. So why are we still talking about it? Why isn’t everyone doing it?

Some households are too financially precarious to save, possibly as a result of pandemic-related loss of jobs or income. Let’s give them a bye, while also encouraging them to read the first two installments of the back-to-basics series appearing in the Carrick on Money newsletter to start the year (see below).

Another savings roadblock is basic human emotion. Saving is hard, spending is fun. And so, we come up with reasons to spend money that could otherwise go to savings. This is where an automatic savings or investing plan comes in.

These days, an interest rate on savings above 1 per cent is pretty competitive. Open an account at a bank, trust company or credit union offering rates like this and link your account to your chequing account. Then, set up automatic transfers to coincide with payday. The goal is to have savings pulled out of your account just after a paycheque is deposited.

You can do the same thing for most investment accounts. The difference between saving and investing? Saving is money you need to keep safe because it’s for emergencies or you’ll need it within five years. Investing is for money you can take risks with because you won’t need it for at least five to 10 years. That’s long enough for stock market gains to outweigh the down years.

If you make saving discretionary, it’s likely you’ll sometimes use your discretion to not save. Outsmart yourself by making saving automatic. Pick an amount that’s comfortable and go with it. One thought is to start with 10 per cent of net pay, then crank it up to 10 per cent of gross if you can. Do less if you need to, and increase when you get a raise or a better-paying job.

One of the great benefits of automatic saving is that you never have to think about saving. Saving becomes so routine you may stop noticing that you’re doing it at all.


The Back to Basics Series

Part One: Now’s the time to revisit the most basic rule of personal finance

Part Two: Would a 20 per cent interest rate get your attention?


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Rob’s personal finance reading list

Enough with the old house fetish

A U.S. urban planner points out that while people love old houses, “new construction is better on nearly every conceivable measure.” He says old houses are subpar at best and, at worst, unsafe. Now, for a summary of where things stand in the Canadian housing market early in the new year with respect to prices, interest rates and more.

How to evade a common job interview trap

One of the most awkward questions to answer in a job interview is, “What are you currently making?” Answer with your current salary and you may find out that’s what you should expect if you get the new position. A smart alternative answer is explored in this New York Times story.

Credit cards that insure your smartphone

A roundup of credit cards offering insurance coverage of as much as $1,000 if you lose or damage a mobile device purchased on the card.

Retirement planning for young adults

A recently retired senior executive at a big U.S. investment firm offers some encouragement for millennials and Gen Z on saving for retirement. One thing I really like in this Q&A is a note about how common it is for people to think they should be doing better with money.


Ask Rob

Q: What is best brokerage for buy and hold investors?

A: My annual ranking of online brokers will be published Feb. 4. The ranking focuses mainly on the needs of buy and hold investors – last year’s top brokers were QTtrade Direct Investing and TD Direct Investing.

Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length and clarity.


Today’s financial tool

How to verify it’s actually the Canada Revenue Agency calling you and not some jackass scammer.


The Money-Free Zone

The singer Ronnie Spector of the Ronettes died recently and I’ve seen a lot of mentions of the group’s songs. Here’s my personal favourite, Do I Love You?


What I’ve been writing about

More Rob Carrick and money coverage

Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.

Even more coverage from Rob Carrick:

Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.