HOW TO OPTIMIZE YOUR SAVINGS IN CANADA?

The current economic state has been financially challenging for everyone. Job losses, business closures and financial insecurity have happened so quickly. The federal and provincial governments of Canada have offered emergency financial support for Canadians to cushion the impacts of COVID -19 on the economy. Though government stimulus is essential during an economic slowdown, there are a few things one can do to prepare for these types of situations. We offer some of the ways one can optimize their savings.

Emergency Fund

In our blog “4 TIPS ON SAVING MONEY WHILE LIVING IN CANADA”, we shared some tips on how to save money while living in Canada that may help you start your long term savings plan. It is often recommended to start a savings plan for potential financial hardships. COVID -19 is a current example of an emergency that has disrupted our income unexpectedly. It is a good idea to build up an emergency fund to cover your living expenses for three to six months in the future. This money will come in handy for illnesses, accidents, or other unexpected events. 

Retirement

Retirement seems like a far-off decision that we can deal with in the future. However, planning for retirement and saving for your future while you are still young is a smart decision. Making sure you optimize those savings is equally important. Retirement savings should be sacred. One should not touch them unless it is to put more money into them. There are many pension plans you can choose to receive a good retirement fund. One must do research and meet with a financial advisor to plan a tailored plan. These actions will ensure that you have financial security for years to come.

Debt Payments

Household debt is the biggest debt in Canada followed by credit cards and lines of credit. Saving up to pay off your debt is a crucial step towards financial independence. Debt accumulates interest and the longer you take to pay back, the higher the interest rates.  It is recommended to pay off debt starting with the smallest debt so that you can build up extra cash to pay the larger debts. Since your debt likely accrues higher interests than your regular savings account, you need to get rid of your debt as soon as possible in order to optimize your savings.

Investments

Once you have dealt with your debt, you should consider allocating some of your savings in investments. Using a carefully planned strategy to buy capital and assets is a great way to ensure that your savings keep up with inflation over the long run. Investing may mean putting away your cash for a long time so make sure that you only put in there an amount of money that you would not need in the near future. An investment strategy is something you need to plan carefully with an expert, hence scheduling a meeting with a financial advisor will yield better results. Avoid copying other’s strategies as your strategy will depend on your appetite for risk, financial goals and your money availability.

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