Your Financial Future

Saving for a specific Financial Goal

As you get more established in Canada, your income (the amount you earn) and your expenses (the amount you spend) are likely to become more stable. With this information, you can create a budget and understand exactly how much you make, how much you spend on day-to-day living and how much you have left over. Once you know that, you can start a savings plan.

What are you saving for?

Designing a savings plan starts with identifying all the things that you’re saving for, how much each is likely to cost and deciding which are most important. An easy way to do this is with a goals chart:

1. List your goals. Your goals might range from fairly small items (such as buying a new winter coat and boots), to a larger amount (your daughter’s wedding or a family vacation) or even a very large amount (a down payment for a house or putting funds aside so that you can live comfortably during your retirement).
2. Set a timeline for each goal. Assigning a timeline for each goal will help you see which ones require your immediate attention and also help determine the best saving or investment option for each.
3. Calculate how much money you’ll need to set aside each month to meet each goal. For smaller goals that you want to reach soon, this is fairly straightforward. Just take the amount that you’re aiming for and divide by the number of months until you want to reach it. For larger goals (your retirement or buying a home, for example), there’s more involved than taking the amount you’d like to have and simply dividing the number of months or years. You’ll also need to factor in the compound growth of the money that you’re setting aside, and understand that the growth of your investments depends on the type of investment you make. An RBC representative can help with your investment options and the calculations. You can also use the online calculator to calculate your Future Value.
4. Decide which goals are most important. Once you have determined your savings goals, put them in priority or order of importance. For example, your most important goals might be rated "1" and the not-so-important ones would be a "10." After paying all your regular expenses, you may not have enough money to put toward all your goals, so it’s important to decide which ones you want to focus on.
5. Calculate how much savings you already have to put toward those goals. If you have any savings that can be used to pay for one or some of your goals, you can deduct that amount from the amount you need — you’re already on your way to reaching it!

Here’s an example of what your goals chart might look like:

Finding the money

Now that you’ve put down and prioritized your goals, you know how much you need to save every month, you may be thinking, "I can't possibly save that much. Once I’ve paid all my expenses, there's not that much left over!"

That's why you need a budget. By writing down everything you spend, you’re likely to spot small items that really aren't that important to you. It also helps you to become a little more disciplined in your spending. By paying attention to where your money goes, you can bring together these small amounts and redirect them toward your savings goals.

For example, suppose that you typically spend $7 a day to buy lunch. If you bring your own lunch to work instead, just three days a week, you’ll have $84 every month that you can put towards one of your goals.

How paying yourself first pays off

Once you know how much you can save every month, you can really make progress by committing that amount to a regular saving plan. In other words, put that money away before you have a chance to spend it.

Paying yourself first is easy and convenient. You can set up a pre-authorized, automatic-saving transfer through RBC. For example, if your paycheque is deposited into your chequing account every two weeks, a portion of it can be transferred automatically to your savings account or a specific investment.

An RBC representative can help you set up pre-authorized transfers.

Where to put your money

Certain types of savings accounts and investments are more appropriate for some goals than others. Here are some popular options to explore:

• High-interest savings account. Bank accounts like RBC High Interest eSavings and RBC Enhanced Savings pay a higher interest rate than standard chequing accounts.
• Guaranteed Investment Certificates (GICs). If you won’t need access to your money for a year or more, you can take advantage of the higher interest rates available on GICs. These safe investments are available in terms from one to 10 years (the term is the length of time the money is invested for).
• Registered Retirement Savings Plan (RRSP). When you are saving for retirement, an RSP is usually your best choice. The amount you contribute is tax-deductible (if it’s within your RRSP limit) and generally, amounts that you earn within your RRSP plan is tax deferred until withdrawn. You can also take advantage of RBC RSP-Matic^® and have regular payments made from your chequing or savings account into your RSP.
• Registered Education Savings Plan (RESP). If one of your goals is paying for a child’s education at a university, college, or other designated education, community college, vocational or technical institute, you may want to consider an RESP. Like an RSP, all the earnings in the plan are tax-deferred until withdrawn. In addition, your contributions may qualify for the Canada Education Savings Grant (CESG), a government program that can add as much as $7,200 to the savings for your child’s education.

Whether your financial goals are large or small, you can reach them when you have a plan. So start today!

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