January 15th

Wealth Building Tips

Make a few dollars today into big money over the course of a lifetime using compound interest!

Why is compound interest important to you?

Because it can turn just a few dollars today into big money over the course of a lifetime!

  • You want savings to compound as often as possible. It’s better if you compound quarterly rather than annually when you’re saving money.
  • Time is on your side. The longer money compounds, the faster it grows. Money growing at 6 percent per year will double in about 12 years, but it will be worth four times as much in 24 years.
  • Compound interest requires you to sacrifice today to reap a benefit tomorrow. It’s true that you’ll need to do something to save a few dollars today. But, it’s certain that the future reward will be greater than the sacrifice.

Tips for 20 Somethings

  • When your student loans and other non-mortgage debt is paid off, put aside some money in a Tax-Free Savings Account (TFSA) to cover any unforeseen emergency expenses and RRSPs to increase your earnings.
  • WHEN you start saving outweighs HOW MUCH you save.
  • That is the value of compound interest. When time is one your side, use it wisely to make your money work for you.
  • Starting your savings plan in your 20s is one of the best things you can do.

A Tip for 30 Somethings

  • Did you know that you can use up to $25,000 of your RRSP savings to help finance your down payment on a home through the Home Buyers’ Plan?

Tips for 40 somethings

  • Once your non-mortgage debt is paid off, try and save at least 50% of any bonus for your future and be sure to increase your automatic transfers to RRSP and TFSA accounts when you receive a raise.
  • Reducing expenses, paying off debt, saving an emergency fund that covers 6 months’ worth of living expenses, contributing the maximum amounts to your RRSP & TFSA accounts helps to build up your retirement nest egg.

Tips for 50 somethings

  • This is the time to increase contributions, and decrease investment risks. Is now the time to move to a smaller home as a way to save you thousands of dollars in taxes, utilities and insurance?
  • This is extra money that you can funnel into retirement savings.
  • Get ruthless about carving out as much of your current income as you can and stashing it in savings. You won’t have the same advantage of compound interest as when you were younger, but you have a target in view — that’s the best motivator of all.

Tips for 60 somethings

  • When you turn 71 the government requires you to start withdrawals.
  • If you have a good pension and other investments to draw from and you don’t think you will need your RRSP at first, talk with your financial advisor to be sure your income won’t balloon when you reach that point.
  • Taking out all the money in your RRSP at once and claiming it as income will land you with a massive tax bill that year. Transfer your assets into a RRIF to convert them into a regular monthly retirement income.
  • An effective way of increasing your retirement income is to work for a few more years.
  • This can go a long way toward increasing your savings while experiencing the benefits of reverse compounding – a benefit of delaying the withdrawal on money you have already saved.

 

 

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