Setting up an automatic savings plan will help you grow your investments
Imagine you have two saplings to plant.
You carefully select a nice spot in your garden and plant them. Over time you pay attention to the one closest to the house; fertilizing and feeding the soil with plant food, watering it during dry times and carefully pruning it. The other you left to grow on its own still continues to grow, but doesn’t look quite as full and lush as the other tree.
Your savings plan isn’t much different from those two trees. You can put some money in an account and hope it continues to grow unattended – or you can invest some regular TLC.
Creating a plan to help grow your savings doesn’t require you to have a green thumb – but it does take a little commitment.
You’ve likely heard the expression “pay yourself first.Opens in a new window” There’s a lot of truth – and importance – to that advice. A 2016 IpsosFootnote 1 survey found that 46 per cent of Canadians over the age of 55 worry they won’t have enough money saved for retirement. To avoid this concern down the road, it’s good advice to make regular saving part of your monthly budget – even small amounts to start can grow into something much larger when you commit to “paying yourself first.”
Automatic savings contributions
Once you have a budget made, working with your advisor, you can set up a monthly pre-authorized chequing (PAC) contribution plan to automatically grow your savings. By creating a PAC, you can take advantage of compound growth and avoid the annual stress of finding money to contribute to your registered retirement savings plan (RRSP), before the tax filing deadline.
Make saving simple
Setting up automatic contributions can make saving simple and potentially help you reach your long-term investment goals sooner.
Reduce your income taxes
When you’re ready to set up automatic contributions, you’ll need to decide where to invest them. While non-registered accounts are an option, the most popular are RRSPs and tax-free savings accounts (TFSAs). Both options are government programs that provide tax-advantaged savings.
Depending on your situation and stage of life, you may want to explore the benefits of each and talk to your advisor about how they can work together to increase your savings – and tax benefits.
Tax benefits with an RRSP
Did you know that contributing to an RRSP can lower your annual income tax? The tax benefits of an RRSP are better than you might think.