Ways to Invest in your Future
A lot of people hear the word “investing” and think that it’s only something that rich people with a lot of money can do. While this perception certainly exists, it’s not true. Even if you only have a small amount of money, you can still invest in your future.
In fact, investing in your future isn’t just possible, it’s important. The word “investing” doesn’t just mean playing the stock market. Investing means building wealth in hopes of putting yourself in a stronger financial position in the future.
Everyone has goals for their future, whether they be saving for retirement, planning a big trip, paying for their children’s education, or just about anything else. If you want to achieve these goals, you need to have a plan and you need to come up with a way to make this plan happen. That’s what investing in your future is all about.
A very key aspect of investing is saving. If you do not have any money saved, you won’t have any money to invest. Start by looking at your budget and see where you can find some savings. Even a few dollars can help. For instance, if you save just $10 per week, you’ll have more than $500 saved at the end of the year. This can make a big difference in your financial plans and give you a good amount of money to start investing.
Saving for Retirement
One of the most important goals to save for is your retirement. If you have a retirement plan available through your employer, this is a great place to start. Depending on your situation and your plan, you can likely have a percentage of your salary deducted from each paycheque and placed into a retirement plan. Some companies even match contributions, which makes saving easier.
Another option for retirement savings is a Registered Retirement Savings Plan (RRSP). RRSP contributions can be used to save for your future and to reduce the amount you own in taxes right now. Any income you earn in the RRSP is usually tax exempt as long as the money remains in the plan. In general, you have to pay tax on the money when you receive payments from the RRSP. If you assume that you’ll be making a lower income in your retirement than you are right now, putting money into an RRSP can be a good idea.
A Tax-Free Savings Account (TFSA) is another common way to save money, including saving for retirement. However, with a TFSA, contributions are not deductible for tax purposes. However, any amount contributed, plus any income earned in the account, is generally tax-free when withdrawn. This makes a TFSA a good tool for other types of saving, not just retirement. You can use a TFSA to save for a trip, the purchase of a home, or just about anything else.
If you’re saving for your child’s education, a Registered Education Savings Plan (RESP) can be a good idea. These are savings plans that are designed to make it easier to save for an education. One bonus of using an RESP is that the Government of Canada contributes an additional 20% to your savings, on the first $2500 in annual contributions made to an RESP. This means you can get up to $500 each year in additional savings by using an RESP.
Other Investment Options
There are many different investment options available, including savings bonds, Guaranteed Investment Certificates (GICs), Mutual Funds, and more. Many of these options are available through the major banks in Canada. If you are interested in these types of investments, an advisor at your bank can help you.
There are other options as well, including stocks, bonds, Exchange Traded Funds (ETFs), and various other types of investments. All investments have various levels of risk attached to them, so you’ll need to determine how much risk you are willing to tolerate.
Do You Need a Financial Advisor?
Whether you choose to work with a financial advisor is up to you. Working with a financial advisor or financial planner can be a good idea if you need some guidance, but it’s important to remember that these services come with a fee attached.
There are many different options available, including “robo-advisors,” which are generally self-guided and often involve minimal human interaction.
If you’re in the midst of a major life event (such as a wedding, birth of a child, retirement, etc.) then you may wish to meet with a financial planner to create a plan for your future. Shop around before you commit to working with someone and ask your friends or family for advice and guidance in choosing an advisor or planner.
No matter what type of investing you choose, the earlier you are able to start, the better. Investments generally grow over time and, if you invest earlier in life, you give your money more time to grow. This means you’ll typically need to put less money in to get the same benefit later on.
Take some time to figure out your financial goals, calculate how much you are able to invest, and then see which options are available to you. By making a plan to invest in your future now, you’re setting yourself up for a more stable tomorrow.