The money management mistake that could be costing you millions
(This article is sponsored by Coast Capital Savings.)
According to census data announced last year, almost 68 percent of Canadian households with a major earner aged 25 to 34 are saving for retirement. Having seen the drastic effects of the 2008 financial crisis first-hand, young people in this age bracket are taking steps to ensure they have money put aside should disaster strike.
So if you’re a millennial and you’re reading this, the chances are that you might already be doing a pretty good job on the savings part of your financial management. But don’t let that lure you into a false sense of security. You might not be losing money but you could be making it grow faster somewhere else.
In fact, doing nothing with it could actually be costing you just as much as spending it. And even if you’re not saving right now or you don’t have a pot of gold collecting dust in your 600-square-foot apartment, not thinking about investing could be a big mistake.
You really don’t need a lot of money to kick off a savings and investment plan. With the right guidance and financial institution, it comes down to minimizing risk and maximizing return.
Entrepreneur Warren Buffett has amassed a wealth of billions following only two rules for investing: “Rule number one: never lose money. Rule number 2: never forget rule number one.”
Sounds simple, right?
But inspirational quotes aside, there are a whole range of practical tools and solutions that can help you ensure you’re making your money work as hard as possible. Coast Capital Savings offers expert investment advice, but with a friendlier approach. And right now, Coast Capital Savings is offering a $200 bonus when you join. That’s an extra $200 you could invest in future you.
Experts would advise you to think about how you invest instead of how much. And you should base this on your personal goals plus what you own, owe, earn, and spend.
With as little as $500 you can place your money in a high-interest savings account or other low-risk investment and reap the rewards later.
But maybe the financial jargon, and acronyms, and scams, and scroungers, and Scrooges, have left you bamboozled in the past. But fear not! Below, we outline some of the key things to consider when investing your money and to avoid coming up short on your financial potential.
TFSA or RRSP
Both tax-free savings accounts (TFSA) and registered retirement savings plans (RRSP) offer ways of parking your investment so that you can take advantage of certain tax implications.
A TFSA tends to be a better option if you’re a younger earner or just starting out in your career. That’s because the contributions you make to a TFSA have already been taxed but you aren't taxed at all on interest or other earnings within the account. A TFSA normally gives you free withdrawals, which means you can put money in, allow it to grow with interest, and then pull it out when you’re ready to make a riskier but higher-yield investment.
RRSPs reduce your taxable income and you are not taxed until you take the money out. So if you save it until your retirement, when you are earning less income, you will then fall into a lower bracket—thus reducing your tax bill. Although it’s lower risk, it is far more costly to access the money should you need it prior to retirement.
Coast Capital Savings has an online calculator, which can quickly determine the best place to invest your money based on your financial status and goals.
Don’t get hoodwinked by products you don’t understand
It’s important that you have a clear understanding of where you’re putting your money. If you’re ever unsure, a financial adviser can help to avoid losing your hard-earned cash to a scam. In May 2018, the British Columbia Securities Commission (BCSC) noted an increased number of cryptocurrency offerings, with many businesses using them to raise capital by issuing newly invented coins or tokens. The BCSC has advised that people should use extreme caution in trusting their investment to a supposed blockchain based halfway around the world at the risk of being ripped off.
In short, know your stuff.
Understand the fees
Make sure you understand the financial outlay on an investment or opening an account. While some fees might be upfront, other penalties will be applicable when you try to access your money earlier than you expect. That’s why it’s crucial to assess your goals and timelines from the beginning.
And, never forget rule number one.
Sign up now to become a member of Coast Capital Savings and enjoy some of the great benefits outlined above, plus a $200 bonus—and start saving and investing now! Follow this series for more tips and advice on how to make banking simple and convenient, while achieving your financial goals.More