Saturday, April 11, 2015
Where to Put your Savings
Savings to gain financial independence. I have heard time and time again to save money and invest... But what does this really mean?
Save money... Where? Under my mattress, in a bank account, an RRSP, a TFSA, Real estate, the stock market? when starting out there are so many abbreviations and options its memorizing. I will outline my plan as your average joe. Keep in mind I have no finance training but I am continually learning.
My plan has only recently started! I bought my first home in 2013. The first item I owned that is in some form an investment and adds to my net worth. I basically bought 1/4 of my home with a large down-payment, now I will pay the rest of it off over the next 25 years. Depending on your situation it may be a good move to buy a home as opposed to renting and throwing your money away. You can turn the money you would normally pay in rent into equity!
The second thing we need to discuss is "SAVINGS". By this I don't mean the "HIGH INTREST" account the Canadian banks offer :/. Meaning I believe you can do better then the < 1% most accounts offer. This leaves us with RRSP's, TFSA.
I utilize both! RRSP's are great as they can hold money for you until you retire growing sometimes at substantial rates of 10% or greater depending on your funds! much better then that 1% the bank would like you to take. The other clear advantages to RRSP's are they provide you with some relief during Tax Time. for every $1000 you invest in an RRSP you will get $300 back at Tax Time. realistically you just made $300 you would not have had otherwise. The other positive is many companies (mine included) often match RRSP contributions. ie. if I invest $3000 the company I work for will also invest $3000. that's $6000 per year with the interest compounding.
Now onto the TFSA! Personally I love TFSA as a form of savings. The Canadian Government says right now you can add $5500/Year to a TFSA and they plan to increase this to 11000/year. I believe you should concentrate on RRSP's first however, its a good idea to put additional savings into here as any gains made from investments are not taxed!
In my RRSP accounts I have purchased Mutual Funds, these are safe funds containing various forms of investments that will gain value over time. I will discuss these further later!
Then the TFSA, You can purchase mutual funds within the TFSA as well however, you can also open an account and purchase stocks! This is my approach. I plan to overtime purchase stocks that will grow and pay dividends to me over time to add up.