October 11th 2017 - by Amanda Perkins
Your 20s and 30s include some of the best years of your life. You’ve completed school, started working, earning more money than ever before and now have money for things like weekends away with friends, dinners out or a little retail therapy.
These are also the perfect years to start thinking about your financial future. It’s a perfect time to start saving for your retirement, an emergency fund, or big financial goals such as buying a home, planning a wedding or sending kids off to school. Unless you start focusing on your savings early, you may not have the nest egg that you dream of.
Make your savings automatic
Set up an automatic transfer from your chequing to your savings account each pay day. You should try to aim at around 10-20% of your pay, but if you have additional to pay off, factor that in to your overall goal.
Get your money out of your chequing account
Once your money comes in on pay day, it’s not ideal to leave it in your chequing account. You should be keeping your money where it can earn interest. Keep just enough in your chequing for your spending needs during your pay period, while keeping the rest in a high interest savings account (like our Platinum Savings Account). You always have the option of transferring the money out on your own as you need it but in the mean time it’s earning interest for you every day.
Since you are only in your 20s or so, you have lots of time!
Starting early allows more time for your money to grow. You can start with a reasonable amount each week or each pay and it will grow exponentially vs. starting in your 40s and having to make bigger deposits more often. Time is key to earning more interest. At this stage, you can also be a bit riskier with your money since retirement is a long time away. Being a bit more risk tolerant with your investments means you can potentially earn a higher interest rate compared to someone who starts in their 40s and has to invest their money more conservatively with retirement in the near future.
Pay down debt
Don’t forget about any outstanding debt that needs to be paid down while you save. You can focus on both at the same time, but be aware that interest rates you are paying on a loan, credit cards or a line of credit are often much higher than the interest you earn on your savings. Whatever way you choose it’s always a good idea to talk to a financial planner and discuss the best way to split up your funds to pay down debt while still building your nest egg. Both debt and savings are critical to manage otherwise you risk being left with no savings earning interest or a ruined credit score by forgetting to pay your bills and debt on time.