Pay yourself. In order to save, you must take drastic measures and include this expense in your budget, just like any other bill you have to pay. This is what "paying yourself first" is all about.
Use the automatic transfer. When money is automatically transferred in a savings account each month, it makes it more difficult for you to access it. After a while, you don't even think about it anymore, and that's excellent for you.
Resist the temptation. If you leave the money you've worked hard to save in an account that's too easy to access, you might be tempted to dip into it when you need extra cash or to treat yourself to something special. Invest your savings, except those intended for short-term projects (vacation, Christmas presents, etc.).
Set a realistic target. Work toward putting 10% to 15% of your income into savings. It won't be easy at first, but with time you'll get used to the discipline. The more you save, the faster your savings will grow.
Here are some examples.
| Time | Money invested | Cumulative return1 | Total (investment + return)1 |
|---|---|---|---|
| After 10 years | $5,200 | $1,919.57 | $7,119.57 |
| After 20 years | $10,400 | $9,687.78 | $20,087.78 |
| After 30 years | $15,600 | $28,109.23 | $43,709.23 |
| Time | Money invested | Cumulative return1 | Total (investment + return)1 |
|---|---|---|---|
| After 10 years | $26,000 | $9,597.84 | $35,597.84 |
| After 20 years | $52,000 | $48,438.91 | $100,438.91 |
| After 30 years | $78,000 | $140,546.17 | $218,546.17 |
Compound return is the return (which includes interest, dividends and capital gains) that is added, at periodical intervals, to amounts invested. As a result your savings grow faster, because return is always calculated on the total balance, which grows steadily.
Example:
- Investment of $1,000 at 10% per year.
- After 1 year, your investment is worth $1,100.
- After 2 years, your investment goes up to $1,210 ($1,100 + 10%).
Tools and tips
How much will your regular instalment savings be worth?
A useful tool to make your own calculations.
Do the math - How much will your regular instalment savings be worth?
How to reduce interest fees
Tips to stay in control of your debts.
- Based on a 6% compound return assumption for a balanced portfolio (45% in fixed income and 55% in equity) – return based on 2011 Projection Assumption Standards of Institut québécois de planification financière
