How To Save For Life’s Big Expenses
It’s not easy to save enough for life’s big expenses and if you don’t have a plan they can sneak up on you. Don’t get caught and surprised by these events. Here is how you can save for these common big expenses in life and not get overwhelmed while doing it…
What would happen if you lost your job? What if you became medically unable to work? This emergency fund is for exactly that purpose, an emergency. You should have enough saved to carry you for 3 months at the minimum. Most people do not consider this as one of life’s big expenses but it may be one of the most important.
Do what you can.
It does not matter how much you put into this fund, just that you are contributing on an ongoing basis. Make it a priority because it is, at least until you hit that 3 month mark. Any amount you can save will help as it will add up over time.
Pay your bills, pay yourself.
Get in the routine of putting a little away every month while you are paying your bills. Once your other responsibilities are covered, put the rest into your emergency fund.
Save your savings.
Did you save a little money somewhere else this month? Take that found money and save it. You would be surprised how quickly found money can contribute to your goal.
Buying a home may be one of the largest investments of your lifetime and one of the most important of life’s big expenses. The bigger the down payment you have, the more equity in the house.
Dedicated Bank Account.
Open a bank account that is dedicated to saving for your down payment. Research which savings account will give you the highest returns.
Have this account set up to automatically transfer a set amount of money every month from another account to this one.
Tax refunds, inheritance, lottery winnings, any found money that was not budgeted to go elsewhere is a great addition to your down payment.
Is your employer offering overtime? Do you have the ability to take a second job? Any extra money you can bring in can go directly into your down payment fund. You will be amazed at how quickly this can help your account grow.
Education for Your Children
With the costs of tuition going up every year, if you are contributing you may want to start saving early. This is perhaps the only one of life’s big expenses that you know of well in advance.
Registered Education Savings Plan (RESP)
Investing small amounts when the child is young will grow over time and cover a portion of the education costs. When the time comes for them to go to school, you will be thankful you did.
Canadian Education Savings Grant (CESG)
The Canadian Government will match 20% of the amount of your RESP contributions each year to a maximum of $500 for each child. This can be done every year until your child reaches 18 years of age. This can reach as much as $9000 in grant money from the government per child.
Tax Free Savings Account (TFSA)
Saving for their education in a tax-free account can save you a significant amount in taxes. Think of it as an additional interest on the account.
Canadian Child Tax Benefit (CCTB)
Apply for the tax benefit when your child is born and put this money in to the RESP. The Government gives money for children under 18.
Birthday money can add up over the years as well, and instead of spending it on the latest toy encourage your children to save themselves. Show them the value when they are young and by the time they have their own part time jobs hopefully they will begin putting a little away themselves.
Live your life more comfortably when you have the time to enjoy it.
Set a goal of 10 – 15%
Try to put 10 to 15% of your annual income into a retirement account. The earlier you begin, the better off you will be.
Registered Retirement Savings Plan (RRSP)
Take advantage of your RRSPs and try to save 18% of your income. The more savings now, the better you account later.
Tax Free Savings Account
A tax free savings account is a great way to help you put more money away. It should not replace your RRSPs but they can definitely add to them.