Next to career advancement, warm winters, and the Stanley Cup, healthy savings accounts are sort of the Holy Grail for many Canadians. But with Statistics Canada discovering that under-35s were one of the least likely groups to own homes in 2019, it’s clear that putting aside money is often easier said than done for young adults.
What if we told you that picking up next-level money-saving strategies didn’t have to involve spreadsheet wizardry or reality TV show-worthy stunts? What if you could eat the same foods and watch the same shows while seeing your savings grow to new heights?
If any of that sounds good or at least makes you want to grab a beverage and settle in, we’ve got your back. Keep reading to see our step-by-step guide to saving money as a young Canadian.
Financial Stability Starts With Your Financial Self-Assessment
Have you ever wondered how two people can earn the same salary while being in completely different financial situations? The good news is that financial stability is a skill that you can learn. But before you can start crafting your financial plan, you have to give yourself a financial audit.
1. Find Out Where Your Money Is Going
Imagine you’re going on an adventure hike through the Rockies. You’ve got your trails picked out and your gear packed up. But while your clothes and your food choices say, “Summer camping, here I come!”, you’ve booked your trip in late January.
As Canadians, it’s hard to picture anyone making this type of mistake. But it happens all the time to people who are planning their financial futures. So here’s the bottom line:
You might know your financial goals in a general sense. But if you’ve only got a vague idea of how your money is being spent each month, you’ll have a hard time managing your expenses. Like a hiking group that’s planning a winter trip to Banff, you need to understand the facts on the ground so that you can plan your finances accordingly.
2. Evaluate Your Income Sources
Sometimes the problem with putting away money isn’t a lack of financial discipline. It’s a lack of income.
Whether you’re a recent grad or someone who graduated a few years ago, we all have baseline expenses. And if you’ve got $200 left after your bills and groceries, nothing short of upping your income will help you reach your $500 a month savings goals.
The good news is that if you can’t negotiate a raise at work or an increase in your hours, you can find side hustles and gig jobs that’ll supplement your regular income. Are you able to try your hand at the stock market? Should you look for new career opportunities?
Even if all you have the bandwidth for is a couple of Uber customers a week, those seemingly small earnings can really add up over the course of a year or two.
3. Create a Sustainable Budget
Every year, tons of people decide to make being fit and eating healthy a top priority. They go on extreme diets and they start lifting the heaviest weights they can manage. And then they give up after a difficult few weeks.
In a way, budgeting your money is a lot like getting into shape. Sure, you can do the financial equivalent of going on an extreme fast by cutting your Netflix bill and eating one meal a day. But that might not be a spending strategy that you can stick to over the long haul.
We talk more about financial planning elsewhere on the site. But the general point still stands. The best budget for your situation is one that you can stick to consistently.
Money-Saving Strategies That Work
Okay. At this stage, you’ve assessed your current spending habits, looked at your income level, and created a budget that makes sense for your lifestyle. Here are some tactics that you can use to build up your savings accounts:
1. Reduce Your Food-Related Costs
The cost of living is a subject that’s been on everybody’s minds as of late. And with food prices expected to keep rising in 2022, Canadians may find themselves paying more for their groceries even if they stick to the same shopping lists as before.
Fortunately, there are still ways that you can eat well while spending less on food. For example, you can bulk up a lot of meals by using less meat and more veggies. Or if you’re into lentils and soup, it’s possible to make lunch at a shockingly low price per serving.
From making coffee at home to purchasing frozen pizza, you’ll be surprised at how easy it is to eat well while cutting costs.
2. Comparison Shop
In 2017, MarketWatch estimated that Americans would have collectively saved $2.2 billion if they had just taken the time to comparison shop online. And with the growth of online marketplaces and delivery services right here in Canada, there are even more bargains to be found with the help of a simple Google search.
Is that face wash you use available for less at Amazon? Can you find cheaper products that are capable of getting things done at a fraction of the usual cost?
Taking the time to stop and say, “Wait. Let me see what else is there.” might feel a bit strange if you aren’t used to doing it. But when you add up the savings, you’ll be glad you made deal-hunting a habit.
3. Take Another Look at Your Insurance
For many Canadians, insurance is right up there with rent and groceries as far as monthly costs go. Because of the way quotes are generated, however, it’s not unusual for young Canadians to assume that their insurance policies are written in stone. But in reality, you have more control over your insurance costs than you might think.
Have you spoken to a broker about your options? Have you considered increasing your deductible and lowering your monthly premiums?
To be clear, this is a decision that you’ll want to make with the help of an insurance professional. But it is worth pointing out that there are savings to be had simply by reviewing your insurance policy from time to time.
What Should You Do With Your Savings?
Let’s assume for a minute that you’ve developed an efficient financial system for yourself and that you’ve started saving money in a big way. Is there anything you should be doing with your self-made financial windfall? We’ve got a list of three top recommendations.
1. Pay Off Debt
If you were to add up the total amount of everyone’s debts, Canadians would easily owe billions. As such, even if you don’t have a mortgage or a huge auto loan adding to your totals just yet, you might still have credit card debts or student loans that still have to be paid back.
The biggest benefit of paying off debt is that it can improve your credit score and free up your disposable income even if you’re making the same amount or even a little less than before.
In personal finance circles, the two preferred repayment strategies are known as the avalanche strategy and the snowball strategy. With the snowball strategy, you’ll pay your smallest debts first. And with the avalanche strategy, you pay your highest-interest debts first.
Each debt repayment option will have its pros and cons. But if you owe money or you have a balance to pay off, we recommend putting at least some of your savings towards reducing your debt load.
2. Build an Emergency Fund
If the pandemic has taught us all anything, it’s that life can change in an instant. Your company could be bought out and downsized next year. And on a house and home level, your car and your furnace could suddenly need repairs at exactly the same time.
When you need money on short notice, having an emergency fund can give you access to interest-free cash in a pinch.
3. Plan For Your Retirement
You know what’s worse than leaving a career you love? Leaving a career you love with no money to fall back on.
Retirement has a lot of perks. For starters, you can sleep in every morning for the rest of your life. And you’ll never have to answer to a boss ever again.
But while retirement allows you to ditch the structure and routine of a 9 to 5, you also lose out on getting a consistent paycheck. That’s why retirement planning is often considered a part of Personal Finance 101.
This Is Why Saving Money Feels Like an Uphill Battle
For younger Canadians, times are as hard as they’ve ever been. The job market is as competitive as ever. And the rising cost of living is making it harder and harder to put money away.
With the help of the money-saving strategies we’ve just given you, however, cutting down on costs doesn’t have to be complicated. All you need is a long-term budget, a tailored strategy, and a strong commitment to your financial future.
Are you looking for financial advice or a loan? You’ve come to the right place! Contact us to discuss your financial needs today.