Why it’s important to invest in your future
Note: this post was sponsored by Scotiabank for Financial Literacy Month, but the views and opinions are my own.
Last weekend when I was in Toronto for the Canadian Personal Finance Conference, I chatted with a few of my blogger friends about how we sometimes get caught up in our own little nerdy financial bubble. We often assume that our friends outside of the blogosphere understand the basic concepts personal finance, and so we tend to glaze over fundamental topics like paying yourself first, or even saving for retirement.
And that reminded me of a conversation I had recently with a friend about our work pension plans. Both companies we work for offer matching RRSP contributions to a maximum of 3% every year. I enrolled in my corporate plan on my first day. It’s free money – and I honestly assumed everyone did the same. So, imagine my surprise when my friend told me he had been at his job for over 3 years, and never contributed!
I asked why (since he knew he was leaving around $2,000 on the table every year), and he said that after all his monthly expenses are added up, he doesn’t have anything left over to save. I understood where he was coming from (living in Vancouver is super expensive), but I couldn’t help but think that if he looked a bit deeper into his finances, he could figure out a way to save for his future – or at the very least, get that 3% match. :)
Coincidentally, I had the chance to speak with Ahmad Dajani, VP of Retail Deposits and Investments at Scotiabank last week, and wanted to ask him some questions that could potentially help my friend get started on his path to financial independence.
Here are a few of the questions I was able to ask:
How would you suggest someone start investing when they have very little room left over in their budget after their monthly expenses?
AD: The best approach would be to Pay Yourself First. What I mean by this, is putting aside a portion of your income to save, before you begin to pay any other expenses. And, by making saving automatic using a pre-authorized contribution, saving becomes a habit. Even starting with a contribution of $25.00 will help set you up for success and you should revisit how much you contribute as your situation and goals change.
(Just as a side note – that’s exactly how I began saving for my future – with contributions of just $25/month when I was just starting out. Then as my salary increased, so did my contributions!)
When would you suggest someone start saving for retirement?
AD: As early as possible, as soon as you start your first job. Even a small contribution can grow to a surprising amount with compound interest over time. When using tax sheltered plans, such as an RSP or TFSA ensure you are eligible and have contribution room available as the rules are different for both. Please check with your advisor on other eligibility criteria and with CRA on your contribution room for each. There are lots of great tools online you can use to determine how much you’ll need to retire. Better yet meet with a financial advisor and they can work with you to figure out all those details.
What are the elements that make up a solid financial plan?
AD: A financial plan is dynamic and always evolving – just like you. It should take into account your current financial situation and provide you with strategies to help you stay on track to achieving your goals. It includes both borrowing and investing elements, and more sophisticated plans can include insurance and estate planning. Financial Planning does not have to be overly complicated however. A financial plan is available at Scotiabank at no cost and no minimum portfolio is required to ask for it.
What are the top things Canadians need to learn more about when it comes to their own finances?
AD: Canadians may be interested in learning more about the many resources available to help them prioritize their financial goals and save more. Finances do not have to be overwhelming or intimidating and there are many programs and tools available to help you save. Remember that even small changes can make a big difference in your savings. I would encourage everyone to do their research, start conversations and sit down with a financial advisor to learn about the options and free tools available. It could make all the difference in achieving your financial goals.
So, what’s the best financial advice you’ve ever received? Share it on Scotiabank’s Facebook page for a chance to win $1,000!
Author: Krystal Yee
I’m a personal finance blogger and marketing professional based in Vancouver. I’m a former Toronto Star (Moneyville) columnist, author of The Beginner’s Guide to Saving and Investing, and co-founder of the Canadian Personal Finance Conference. When I’m not working, you can usually find me running, climbing, playing field hockey, or plotting my next adventure.