Paying rent, utility bills, debt payments and groceries while also trying to save money and have some left over cash for things you actually enjoy, can seem almost impossible to do. Especially during inflationary times when the prices of your day-to-day expenses seem to keep going up; this can make saving and investing seem quite daunting and almost out of reach when first starting out. Here are 4-steps to help you get started.
Step 1: Start investing as early as possible
If you are in college or university or working your first part-time job, putting away as little as $25 a month could give you a nice little nest egg; which could then go towards your first car or a downpayment for your first home. Coming from someone who used to buy Starbucks everyday while going to school, I wish I put some of that extra cash into an investment savings account.
Below is an example of what the end value would be if you were to invest $25/month earning 7% interest for 4 years.
Try the investment calculator here! https://www.fidelity.ca/en/growthcalculator/
Step 2: Decide how much to invest
We all have different saving goals that will impact how much/frequent you invest. Some people may choose to invest bi-weekly, others monthly, or a large amount annually. The amount and frequency will vary depending on the individual and lifestyle factors including financial goals, mandatory expenses, annual income, affordability and comfort level.
Step 3: Open an investment account
Depending on what your financial goals are will impact the type of investment account you open.
TFSA: The Tax-Free Savings Account is a great option for short to long term investors. This account is very versatile and can be used for almost all financial goals; extra savings, retirement, purchasing a car or a down payment on a home. The money within this account also grows tax free!
FHSA: The First-Home Savings Account is a great option for investors looking to buy their first home. This account is intended to be a downpayment of your first qualifying home. The contributions lower your taxable income and give you a tax-deduction. Withdrawals for a downpayment are also tax-free!
RRSP: The Registered Retirement Savings Account is great for investors looking to save for their retirement. Contributing to this account will lower your taxable income and defer the tax until withdrawn.
Step 4: Understand your investment options
As a new investor, there are thousands of investment options to choose from which can make it an overwhelming process. As a beginner, it is important to know the basics.
Stocks: Also known as equities or shares; owning a stock means you have ownership of a small piece of that company. Purchasing stocks provides the opportunity to grow your wealth through capital appreciation or dividends.
Bonds: Also known as fixed-income securities; bonds are debt instruments issued by the government or corporations to raise money. When you buy a bond you are essentially loaning the issuer money. If the bonds are held to maturity the investor gets the entirety of the investment amount back, including the interest payments, also known as yield.
Mutual funds: A mutual fund is a “one stop shop” that mixes stocks, bonds and cash – the percentage of each will vary depending on the risk/type of mutual fund. Typically mutual funds will have a portfolio manager(s) who manages the fund, making sure to allocate into high quality stocks and/or bonds so you don’t have to.
If you’re thinking about investing for your future, don’t hesitate to give us a call.
Have a great weekend,
Paige
Sources:
https://www.fidelity.ca/en/growthcalculator
https://www.nerdwallet.com/article/investing/how-to-start-investing
Photo by Vitaly Gariev on Unsplash
Products or services related to investments, investment recommendations, financial planning, retirement planning, and investment reviews are provided through our mutual fund dealer Security Financial Services and Investment Corp. 4665 Yonge Street, Suite 309, Toronto, ON M2N 0B4 t 416.964.0440