Understanding where your money lives and how it grows is an important part of taking control of your finances. The official terms for this are saving and investing, respectively. Let’s dive in.
Saving and investing
It’s not always easy to motivate yourself to put money aside. Thinking about what’s important to you, identifying your goals and making a budget can help kickstart this process and will really pay off. No pun intended. As you’re saving money, you can work with a Scotiabank Advisor at no additional cost to learn more about what investment opportunities are right for you.
Pay yourself first
A great way to create good saving habits is to set aside your savings before you start spending. After ensuring you have enough to cover your day-to-day expenses (like food and rent), you can set up automatic transfers to your savings account. You can set the amount and frequency of these transfers to help meet your savings goals.
Chequing and Savings accounts
A chequing account is what we call a “transactional” account and is where you’ll most frequently make transactions from, including when you use your debit card, withdraw money from the ATM or send an e-transfer. To help keep you organized and separate your spending from your savings (University Savings, Europe Adventure, etc.), we recommend a savings account. A savings account lets you earn interest so, down the line, your savings will grow. But… how? Banks lend money in savings accounts to other customers in the form of a loan. In return, the banks pay you interest on the money in your savings accounts. This means your money is making money – and all you have to do is watch it happen.
Tax Free Savings Account
Many people opt to use a Tax-Free Savings Account. A TFSA, as these are called, allows you to set aside money that then grows tax-free throughout your lifetime. You can withdraw your TFSA savings from your account whenever you want, for any reason. Even better? All withdrawals are tax free, which means you don’t have to pay tax on the interest you’ve earned. It’s important to note that you cannot open a TFSA or contribute to one until you turn 18, and there is a maximum amount (currently $6,000) that you can contribute to your TFSA each year.
Let’s get started.
If you have a job or get an allowance, why not test out your new savings skills now? There’s no time like the present (oh, and maybe you can buy yourself a present with the money you save at the end of this). While you may not be in a position to invest money yet, see how rewarding setting aside part of your income (e.g., weekly pay or allowance) can feel after just a few weeks. With as little as $5 every week, you’ll see your savings build up and, most importantly, you’ll build your saving habits.