So you want to start saving. Step one, says Brad Compton, Investment Advisor, Assante Capital Management Ltd., “create a plan.” He explains: “Whether you are trying to save for your first home, your first car or your next big trip, the plan will lay out the steps to get there and give you the ability to measure your progress along the way.”

Your action item this week will be to think about what your savings goals are. What are you saving for? How much would you like to save? What is your timeline? And remember to be specific, says Compton, “there is a big difference between saying ‘I am going to save more this year’ and ‘I am going to save $5000 this year’.”

He advises: “You need to consider the type of account to use that is best suited for your goal. This could be as simple as setting up an additional bank account to save for shorter term goals or opening a TFSA or RRSP for longer term, more tax efficient savings.”

TFSAs

Tax-Free Savings Accounts are a great way to start saving. Investment income earned in a TFSA is not taxed (in most cases) and contributions to a TFSA are not deductible for income tax purposes. A TFSA can be either a cash savings account or, like an RRSP, can contain cash and/or other investments.

The cash in a TFSA collects interest just like a regular savings account but that interest is tax-free.

RRSPs

Registered Retirement Savings Plans are excellent long-term savings strategies. Pre-tax income is contributed to the account and grows, tax-free until withdrawal.

Contributions can be deducted against your income annually to reduce tax and returns are exempt from capital gains tax, dividend tax or income tax.

High-interest Savings Accounts

As the name suggests, a high-interest savings account is much like a regular savings account but earns more interest.

Make sure to look for accounts that offer everyday high-interest rates and low transaction fees.

Compton explains: “Most people do not save (or do not save enough) because they feel they do not have the money.” But a little goes a long way. Now that you have an idea of what you’re saving for and some options for growing your savings, you’re ready to start working toward your savings goal!

Read the Week 5 Blog on Investments.