No Savings?
You’re not alone. According to a 2019 poll by accounting firm BDO Canada Ltd., more than a third of Canadians have no savings, and there are a number of reasons why: high costs of living, spending beyond their means and not understanding how much they need to save in order to protect themselves from unexpected emergencies or to meet retirement plans are just a few roadblocks to achieving security.
This issue can be especially pronounced with students or recent graduates who often are paid less (if early in their career) and may only have the funds to go towards paying down student loans and student debt, without much left to go towards savings.
Can we talk about how this feels for a moment? It’s in the back of our mind, surfacing from time to time, causing anxiety or stress and is easier to dismiss in order to maintain inner peace in the moment. But as we grow older and take on more responsibility, we feel that not having savings is irresponsible and an issue that is best addressed now, before it’s too late. When we ignore our finances, we not only miss out on the opportunity to make progress, but we could be making the situation worse in the long run.
An easy first step towards building your savings is to take an inventory of your finances to fully understand your income, debt and where you spend your money. There are a number of trusted resources that can help guide you through this process, and you can record the information on paper, in a spreadsheet, or if you like to keep the information at your fingertips, there is certainly an app for that!
Once you have the full picture of your finances, build a budget with what you have. You may be able to identify opportunities to tuck money into a savings account or areas where you can cut back to make saving possible. Tracking your expenses on a regular basis is a great way to remain accountable to this budget and stay on track.
How much should I save?
This is a common question, but not the only one to consider. What are your savings goals? What are the timelines associated with your goals? Maybe you are saving for a down payment on a house, an unexpected emergency like a broken dishwasher or a job loss, or your retirement on a secluded beach somewhere. All of these events likely have a timeline associated with them, and can be reverse engineered to come up with an funding estimate.
A simple answer and common school of thought can be described as the 50/30/20 rule:
- A maximum of 50% of your income should go toward necessities
- 30% goes toward discretionary items
- 20% goes toward savings (more is fine, but less is not optimal)
We have provided some resources below to get you started. Take these first steps and check-in with how you feel. Maybe you feel accomplished, maybe you feel the anxiety and fear you knew would arise. Regardless of what happens, we encourage you to reach out to your local credit union. When you sit down with a financial expert that cares about you and your money, you become part of a team that wants you to win. Call your credit union and ask to make an appointment to build out a savings plan customized for you and where you are today.
Resources
Understanding your finances and building a budget:
- Financial Consumer Agency of Canada – Making a budget
- Credit Canada – How to create a monthly budget
App ideas:
- Free budgeting apps – Mint, KOHO and Wally
- Paid budgeting apps – YNAB, Good Budget and Spendee
- Money-saving apps – Checkout 51, Drop and Caddle
- Apps for saving and investing spare change – Mylo and Wealthsimple Roundup
- Bill paying and tracking app – Paytm
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