Looking for an easy and convenient way to start building up savings for retirement? With Pre-Authorized Contributions (PACs), you choose the amount you’d like to contribute, and how often – and you make adjustments at any point in time!
The beauty of a PAC is that it’s automatic. Just choose the amount you want to save and how often you want to save it–for instance, weekly, biweekly or monthly. Once it’s set up, you’ll be saving money without even thinking about it.
1. Helps you stick to your plan
When it comes to saving, it’s sometimes easy to get sidetracked. A PAC allows you to make saving priority number one by ensuring you never forget your plan.
2. Minimizes scrambling to meet Registered Retirement Savings Plan (RRSP) deadline
With a PAC you’ll save automatically for your RRSP–all year round–and avoid the stress of meeting the RRSP contribution deadline and making a yearly lump-sum contribution.
3. Eliminates the guesswork of when to invest
Research has shown that investing on a regular basis is much more effective than trying to “time the markets”–especially during periods of volatility.
4. Works with almost any budget
With a PAC, you determine what you can afford to save. Get started with as little as $25 per month.
5. Takes advantage of potential compound growth
Saving over a longer period of time allows your money more time to grow and to benefit from compound growth.
“PAC” it up – contribute more as you earn more
As you get older, it’s likely your cash flow will improve. While two in three Canadians are saving on a monthly basis,2 many forget to adjust their plan as their financial circumstances change. It’s a great idea to revisit your PAC contributions on a regular basis– especially after major changes, like paying off student debt or landing a promotion. While it’s tempting to just set it and forget, you’ll be amazed by how much more you can save by increasing your contributions–even a little bit.
In the graph below, we look at an investor who contributes $200 monthly for 15 years versus the same investor increasing their monthly contribution by just $25 each year.
Make it bi-weekly and save even more
Changing your contribution from a monthly basis to bi-weekly can really add up. You may be making bi-weekly mortgage payments. Do the same with your savings. It’s a small change, but the benefits can add up.
The example below underscores the savings advantage provided by bi-weekly contributions over a 20-year period.
PACs - making the most of market volatility
Market swings often make it difficult for investors to determine exactly when to invest–especially when trying to invest one lump sum each year. However, with PACs you can invest a fixed-dollar amount at regularly scheduled intervals. By contributing on a regular basis, you take advantage of the market dips by purchasing more fund units when your dollar goes farther and in turn, lowering your average cost.
The graph above illustrates regular monthly contributions of $250 at the beginning of each month. As the unit price fluctuates from month to month, the quantity of units purchased also changes (when the unit price is lower, more fund units are purchased: when the unit price is high, less funds are purchased).
Your Scotiabank advisor can help
Investing on a regular basis through pre-authorized contributions is a great way to build your savings easily and automatically. Try our interactive PAC calculator to see how your savings can grow.
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