* Cambrian will be closed on Friday September 30 for the National Day for Truth and Reconciliation
 

Saving Tips for Beginners

November 18 900x420

Saving money is a major part of your wealth-building journey. But saving is not easy. If the recent pandemic has taught us anything, it’s that the future is extremely unpredictable. It’s hard to ascertain the kind of situations we will face in the coming years.

While a safety net does not make unforeseen events like a job loss or sickness any less painful, it definitely helps ease your mind. Mismanaged finances can cause a lot of stress amid a difficult situation. It’s a good idea to prepare for anything that may happen in the future.

What is saving and why is it important?

Saving is putting money away in a safe place (ideally a savings account) for future use. We recommend opening a high-interest savings account so that your money can earn interest with time.

Your savings can assist with achieving short-term goals such as buying a new car or revamping your living room furniture. A savings account is also an excellent place to keep an emergency fund for unexpected events.

A consistent saving habit can help you reach your personal financial goals quickly. For example, if you are looking to buy a home in the next three years, saving a portion of your paycheck each month can get you closer to your dream of homeownership. Steady and persistent saving will prepare you for a down payment before you know it.

The difference between saving and investing.

Investing is putting money away in a financial asset with the expectation that it will ideally generate profit. While investing may grow your money faster, it also carries a higher risk. Therefore, investing is better suited for medium and long-term goals.

For a beginner who is just getting started in investing, it can be tempting to stack all your money away in high-risk investments. We recommend meeting with one of our advisors to discuss your goals and options. An advisor can help you prepare for your long-term and short-term goals.

For your overall financial health, both saving and investing have notable benefits. A good strategy is to incorporate both methods to reach your aspirations.

How to start saving?

Most people worry that they don’t make enough money to save. However, contrary to popular belief, you can start saving now with the amount you currently make. You can change the amount you save as your financial situation evolves. What matters is building a habit and remaining consistent.

“Saving money is possible when you prepare yourself with a realistic goal and consistent follow-through,” says Lisa Dion, our Financial Services Officer. “There is no minimum or maximum saving amount. Each person’s situation is different. However, we recommend at least six months of savings to cover necessities, for emergencies.”

Here are a few things you can do now to get you started on your journey.

1. Set a savings goal

It’s easier to commit to a new habit when you have a goal. What are you saving for? It may be a new car or a dream vacation; whatever it is, a goal inspires you to stay committed. If you aren’t working towards anything specific, you are likely to lose interest and ambition. Ensure your goal is realistic so that you can stick to it. Check in on your progress regularly and make adjustments as your needs change.

2. Make a budget and stick to it

A budget guides your spending and gives you a clear picture of your financial health. A budget will help you know exactly where your money is going and how much you can save from each paycheck. You may even find “extra” money by discovering areas where you can reduce spending.

3. Pay off high-interest debt

Consumer debt (like credit card debt) carries higher interest than any other debt – usually around 20%. Paying off unpaid consumer debt is a strategic way to save on fees and free up extra income in your budget. Having no debt will save you more money in the long run.

4. Automate your savings

Automate your savings to stay disciplined with your budget. Chances are, there are many items you want to spend your money on instead of putting it in a savings account. Automating your saving contributions eliminates the temptation to shop and helps you stick to your goals.

5. Take advantage of employer match programs

Many young people don’t put much thought into their retirement plans. However, the earlier you start, the more comfortable you’ll be in your retirement. If your employer offers a match to your retirement contributions, take advantage of this “free money” by contributing as much as possible

 

Ultimately, there is no one-size-fits-all approach to saving. At Cambrian Credit Union, we are committed to assisting you with your savings goals and simplifying your banking experience. To meet with one of our advisors, call your local branch to set up an appointment.