9 Reasons to Save Money

9 Reasons to Save Money

Saving money means investing for the future, whether you plan a vacation, purchase of a vehicle, or getting out of debt.

Saving to Get out of Debt

If you are stressed and struggling with debt, it is a good idea to develop a spending plan and create an emergency fund to pay more than the minimum or prepay your loan earlier – see here. A spending plan will help you to set priorities, cut down on some expenses, and make other changes. List expenses such as insurance premiums, car payments and repairs, cash advance fees, child care, bus fare, and property tax. This way you will see where your money goes. A mistake you should never make is take cash advance on credit cards.

Choice

Cash in your savings account gives you more choices, whether to go to a public or private hospital, to choose a public or private school for your children, and so on.

Saving for Your Kids’ Education

If your kids are studying at a Canadian college or university, what you need is deeper pockets. Tuition fees are on the rise, and you will pay about $7,500 per academic year. A degree in Medicine will cost you over $22,700 per year. It pays to save for your kids’ education, and one way to do this is to place money in a registered education savings plan. One alternative is to opt for a non-registered account. Other options are to purchase life insurance, set up a trust, or open a tax-free savings account.

Buying a House

Buying a house is a costly endeavor, and you will need money to cover the down payment. While prices vary by province and territory, a residential property costs $431,812 on average. To get a standard loan from a major bank, you need a down payment of about 20 percent. Make sure that your credit file looks good and you have control over your debts.

Safety Net

It pays to have an emergency fund as a safety net for a rainy day. If your source of income is limited or dries up, having an emergency fund helps meet daily and unexpected expenses such as groceries, fuel, and medical bills. You can use cash in your savings account in case of emergency such as vehicle and home repairs, electrical and plumbing problems, and others. A safety net is one way to deal with family emergencies.

Investment

There are two ways to secure money to make an investment, one being to apply for a bank loan. The other is to save money so that cash towards your investment vehicle is interest-free. There are different types of investments to consider depending on how much you can save and your risk profile. The market offers plenty of choice, from long-term and mid- to long-term solutions to short-term investments. There are low-risk options that are safe and offer moderate returns – certificates of deposit, money market funds, savings bonds, and others.

Short-Term Financial Goals

It is a good idea to save toward short-term goals such as planned vacations, minor home improvements and renovations, buying household appliances or furniture, and so on. Basically, a short-term financial goal is what you plan and can achieve in a period of 1 – 2 years. Long-term goals, on the other hand, take many years to save toward. It pays to prioritize goals based on your income, household size, debts, and other factors.

Saving toward Retirement

It is a wise idea to start saving toward retirement, and there are many ways to go about this. One is to go for a registered retirement savings plan that holds a pool of investment solutions and savings. There are other options to take into account, for example, opening a tax-free savings account or tax-deferred retirement savings account. Different types of investments can be held in TFSA, including:

• Depository receipts
• Shares
• Partnership units
• Debt securities
• Royalty units
• Installment receipts
• Registered investments
• Cash denominated in other currencies
• Rights and options
• Warranties
• Cash invested in real estate trusts and mutual funds
• Annuity contracts

There are maximum contribution limits for each calendar year.

Freedom

Obviously, cash in your savings account means financial freedom provided that you live within your means. Otherwise, splurging and buying on impulse will eat up your savings.

Resources provided by:
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