Start Saving Straightaway
Between schooling, jobs, rent, and living expenses, it makes sense that retirement is low on the list of priorities for most youth. You should absolutely focus on ensuring that your grades are strong and wallet is not empty while searching for jobs and slowly defining your career path. But time never takes its time. Each year will pass faster than the last. Building savings is the best way to equip yourself for the road ahead. You can start planning for your retirement today in ways that will positively impact your present priorities.
Setting aside some of your money from your work, even from a small part-time job, requires making it a habit. The best way to do that is to start on your next payday. Retirement may be decades in the future, but small steps now will add up to substantial savings down the road. Even saving a nominal amount is infinitely better than nothing, and a pivotal first step on making it habitual. You will cultivate the routine of putting a little bit aside whenever you make any amount of money. This can encourage you to make tiny cuts to your finances in order to save. Even something as small as skipping one of your $2.00 daily cups of coffee can easily result in over $50 saved each month.
Saving now forces you to think about where to put those savings. The government provides two ways to go about it via Tax-Free Savings Accounts (TFSA) and Registered Retirement Savings Plans (RRSP). The former lets you save tax-free and is ideal for those with lower incomes. RRSPs let you save now and pay tax later, which is the better choice when you are earning a large salary and can pay the tax at retirement when you are making less. You can use your TFSA safely with high-interest savings accounts or Guaranteed Investment Certificates, or take on greater risk with mutual funds or stocks. High-interest savings accounts are ideal when you plan to use your money in the near future. If you are putting dollars away and do not plan to use them for years, a good place to start is with robo-advisors such as Wealthsimple. These companies invest your money in a diverse portfolio that keeps the risk low. This virtually guarantees you will make money over the course of multiple years.
Finally, saving for retirement does not mean you will necessarily use the money for retirement. Along your life’s journey, you might decide to go back to school, start your own company, buy a house, or leave an unfulfilling job before finding another one. If you find yourself out of work at some point, that can be a good time to withdraw a portion of your RRSP as you will pay little tax. Having savings gives you a safety net to pursue the things that will truly enrich your life. Retirement will always lay ahead and you want to be prepared, but it is not a destination.
By thinking of retirement now, you will build strong saving habits, become financially savvy, and be equipped for the journey ahead. Putting away a few dollars a week now can eventually lead to a strong investment portfolio. That, in turn, can allow you to chase your dreams and pursue a fulfilling life knowing that you can survive any bumps in the road along the way.
Commisso, Christina. “Start saving for retirement: A ‘how to’ for millennials.” CTV News. https://www.ctvnews.ca/5things/start-saving-for-retirement-a-how-to-for-millennials-1.2745215
Topan, Riana. “A Student’s Guide to Saving and Investing.” TalentEgg. https://talentegg.ca/incubator/2015/02/03/beginners-guide-saving-investing/