Create a Savings Strategy that Works!

By Michael Demner

It is never too early to start a savings program, for many purposes. Whether it's for buying a home, a car, or a vacation, or for ensuring a great retirement, it is important to create a savings strategy, including a budget, a timeline and the right investment plan. Using My Financial Health Advice (MFHA) calculators and resources can help you make the right decisions and maximize your savings. Take Jane’s story as an example.

Jane is single and 25. She knows that she should save for the future but finds the demands on her income make a regular savings plan difficult.

She has a job that pays her rent and enables her to eat out now and then and enjoy the company of friends. 

Jane figured it would be a good idea to set up a savings account at her bank and deposit $100 from each biweekly pay cheque. She hoped that by the time she reached 30 she could buy an apartment. Jane lives in Kelowna where one-bedroom condos currently sell for $300,000. She would have to save $60,000, 20 percent of the cost, as a down payment.

By the time Jane reached 30, her savings had grown to $12,000, after paying bank fees but not earning much interest.

Jane’s real estate agent tells her that today a one-bedroom condo sells for a minimum of $500,000. Now, she needs a down payment of a minimum of $100,000. Jane is not able to buy anything.

How could Jane have benefitted from our advice?

If Jane had become a member of MFHA and accessed our savings and investment calculator, she would have known whether her plan was a good one or not. In fact, our savings and investment calculator would have shown that if Jane had purchased a no-risk Guaranteed Investment Contract (GIC) for the same amount as she had deposited in her bank account, in five years she would have saved $60,000—a lot better than the 12,000 she had accumulated in her bank account.

Also, had Jane kept abreast of the real estate market in Kelowna with the help of the MFHA Annual Planning Service, she would have known to increase her savings rate accordingly. Assuming a reasonable increase in Jane’s salary and making a gradual increase in her savings rate as condo prices rose, we would have provided her with an acceptable investment strategy that would have easily generated the $100,000 she needs today. Each year Jane would have used the Calculator and the Planning Service to determine her new savings amount based on the actual condo price increases. Much better than waiting for 5 years and hoping to find a nest egg to fund the shortfall!

For example, we might have advised her to take advantage of tax savings by saving in an RRSP and/or a TFSA. This would have reduced how much she would have had to save every two weeks while still allowing her to reach her goal. The MFHA Savings and Investment Calculator is designed to show the difference in savings between the MFHA Group Savings Plan and a bank and other financial institutions, as well as the advantages of investing in a combination of a TFSA and an RRSP.

All things being equal, if Jane had become a member of MFHA five years ago, she would more likely been able to afford to buy her condo at age 30.

She could have used the MFHA Savings and Investment Calculator, and reviewed her savings strategy at least annually with our actuary for a reasonable fee. She could have kept abreast of market trends and the latest savings tips and tricks for Canadians with our free resource library, webinars, and newsletters.

In addition she would have had the option to join the MFHA Group Savings Plan, where her money would have been invested in equities to worked harder for her.

Check out MFHA today to see how we can help you with your savings goals!

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