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Guaranteed Ways to Save More Money in the New Year

Dec. 29, 2021
5 mins
A young couple smile as they look at documents

Over and over again, we hear Canadians just aren’t saving enough. According to reports, we owe too much, spend too much, and don’t have a saving strategy in place to build a nest egg for retirement and emergencies.

But now that the expensive holiday season is over, it’s time to put saving back on your radar. Focus on financial goals such as a new car or home, an emergency fund or a retirement plan in the new year.

Here are tips to take your savings strategy beyond a mere resolution and turn it into an actual game plan in 2022 — making your goals a reality.

Choose a financial target

Pick a number, but not just any number. Choose an amount of money based on your goals and decide how much you’d like to save this year.

As a ballpark figure, we should all be saving about 10% of our incomes. For instance, if you bring in $5,000 a month, that is at least $500 in savings. And, when you get a bonus, inheritance, or extra money, sock away 10% of that, too!

The same goes for those who don’t have a regular income. Calculate your earnings at the end of each month and put at least 10% of that into your savings.

Strike a balance

How much you save is going to fluctuate based on circumstances. It might be difficult to save if, let’s say, you have young children or you’ve just moved into a home that needs renovations. Maybe you’re dealing with a lot of debt and need to prioritize paying that down first.

However, you can still try to save accordingly, even if it’s less than 10%. Put smaller amounts away, continue to focus on paying down what you owe, and handle your other responsibilities appropriately.

The key is setting realistic goals that account for your lifestyle. You have to find a balance between saving, spending and paying off debt. You’ll want to keep reassessing this balance as situations change. For instance, once you pay off your student loan, it’s time to save more. When your kids stop needing daycare, adjust again.

Never rely entirely on yourself

There will likely be times when you “forget” to transfer money to your savings, whether it’s on purpose or not. Do yourself a favour by setting up automatic transfers to your savings account monthly or even biweekly, helping you keep your savings on track.

Make your money work for you

If you’re only using a regular savings account, chances are you’re not earning a lot of interest on your money. Or, if you’re stashing cash under your mattress or in a piggy bank, you’re obviously earning no interest at all.

Research some of the many financial products available to help you invest and save. Don’t be afraid to choose a mix of products from different financial institutions.

Compare money products and select the option that will get you a better return on your investment.

High-interest savings accounts

Most financial institutions offer high-interest savings accounts that are flexible with decent interest rates. In other words, you can take your money out of the account at any time, making these types of accounts great vehicles to save for vacations, renovations or emergencies.

Tax-free savings accounts

Tax-free savings accounts (TFSAs) are tax-sheltered, registered accounts that let you save money in various high- and low-risk ways through a financial institution or investor service.

Build a TFSA portfolio with various products from savings accounts to stocks and bonds and even guaranteed investment certificates (GICs). In 2022, you can put aside as much as $6,000 in a TFSA, which is the same contribution room as 2021. Your TFSA contribution room grows every year, and you can never lose it. So, if you can’t contribute the maximum amount, your contribution room will carry over.

There’s no penalty for taking money out of a TFSA, making it a great tool for short-term savings, like a vacation fund or other savings strategy.

Registered retirement savings plans

Registered retirement savings plans (RRSPs) are typically what Canadians without pensions use to save money for retirement. The best thing about an RRSP is getting a tax break if you have one.

You will pay tax on the money when you finally withdraw the funds, but usually, that’s at a much lower tax bracket than when you got your tax break. Plus, your money grows tax-free while it’s in the account. The money is not easily accessible, so it’s not that great if you need the money now or anytime soon, but with the right interest rate, it’s great for long-term investments.

As an eligible first-time homebuyer, you can take out up to $35,000 from your RRSP to use toward a down payment on your home, tax-free. Mature students can also use their RRSP funds to go back to school through the Lifelong Learning Plan (LLP).

Make saving a priority in 2022, one step at a time.

Rates, product information and reward estimates are subject to change at any time and do not constitute financial advice. This post was not sponsored. RATESDOTCA may receive a referral fee from our partners or affiliate links featured on the site; however, our editorial choices are objective and free from bias. The opinions expressed in this article are purely those of RATESDOTCA; thus, the credit card issuers and partners are not responsible for any editorials or reviews that may appear. Please visit the associated brand’s website for complete and current terms and conditions on any product or service mentioned. The information in this article is accurate as of the date of this posting, December 29, 2021. Read our full disclaimer.

RATESDOTCA Team

The RATESDOTCA editorial team are experienced writers focused on sharing stories and bringing you the latest news in insurance and personal finance. Our goal is to provide Canadians with the information and resources they need to make better insurance and financial decisions.

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