What Are You Saving For?

We all know that part of smart financial behavior is to get into the habit of saving a portion of your earnings.  The “rule of thumb” for savings is 10% of gross income.  Many save for a “rainy day,” or “nothing in particular” rather than towards any specific goal or focus.

Everyone has different goals, dreams and obligations.  When you are establishing the habit of saving, having a particular goal makes it a lot easier.

Related: How much of your income should you save?

Here are some potentially costly things we should get into the habit of saving for.

Unexpected expenses (aka the emergency fund)

Again, the handy rule of thumb suggests putting aside three to six months of expenses, but the amount really should be determined by what you feel comfortable with, as well as other resources you may have.

Periods of unemployment can be a lot less stressful when you’re looking for a new job and you won’t be tempted to settle for something undesirable just because you need the money.

Stuff happens.  Things break.  Unexpected events occur.  If you’re just starting an emergency fund, even as little as $1000 would cover a lot of unexpected expenses.

A contingency fund is used for planned expenses such as future repairs or improvements to your home, car, or other possessions.

Related: 30 signs you grew up in a frugal family

Large purchases

This category includes saving for a down payment on a house, or a new vehicle.  Your negotiating power may go a lot further when you have a significant down payment, or pay cash for a car.


One reason to save money is to have fun.  When you save up for that dream vacation you won’t be still paying for the trip two or three years down the road.  The anticipation when saving for a large ticket items such as a boat, or even a PlayStation, will make you appreciate them a lot more.


Saving for education, whether your own or your child’s, can save years of future debt payments.  With an RESP you get the added bonus of the government grant that matches 20% of your contributions to an annual, and lifetime, maximum.  Once you’ve maxed out the grants, you can save additional money in your TFSA for more flexibility.

Related: 35 ways to save money


The latest common advice is to put off retirement savings until debts, including a mortgage, are paid.  The thinking is that when you are young you don’t earn much and you have a lot of expenses when you’re just starting out.

In my opinion you should be thinking ahead no matter how young you are.  The sooner you start, the sooner you will be taking advantage of long-term compounding, and the less you will have to save in the future.  Time is your best friend when it comes to long-term investing.

Related: The best time to start saving is now

At the very least you should set aside the percentage of your pay that reaps the maximum payout if your employer matches your contributions.  You should never walk away from this money.


It can be difficult to prioritize your savings resources, especially if your expenses are high and available funds are limited.  Having clear goals makes you more successful.

What motivates you to save?

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  1. JohnnyStash on March 19, 2014 at 10:38 am

    I speak to some people who state that the 10% (in this case) consists stricty of cash and suggest that , RESP’s, RRSP’s or an additional payments on a mortgage do not, in this essence, qualify as true savings. I differ twith their opinion. Thoughts?

    • Boomer on March 19, 2014 at 2:56 pm

      @JohnnyStash: The “rule of thumb” doesn’t really specify what pot the 10% goes to – only that it is not to be spent.

      Practically, a person needs to check their budget to see how much is available for saving/investing, and then, depending on their goals and wants, allocate the money accordingly.

      • Elizabeth on March 19, 2014 at 5:49 pm

        I always thought the 10% was just for retirement — or at least that’s how I’ve always approached it 🙂

        I’m not sure saving for things like a vacation or a car counts as “savings” rather than “deferred spending”. I’m currently setting aside money to eventually replace my car and to visit family across the country. Essentially, I’m paying for it in advance rather than going into debt — so I guess I’m saving the interest 🙂

  2. Joel on March 19, 2014 at 1:45 pm

    I think that home value has an impact on the percentage of savings required. 10% total savings might be fine for someone with a 750k house whereas someone with a 250k home may need to save more than 10% to fund their retirement. If someone is a lifetime renter with zero equity than “ouch” is all I can say. Of course this assumes that the housing market doesn’t crash this century! Thoughts?

    • Boomer on March 19, 2014 at 3:05 pm

      @Joel: I think you’re presuming that the house value be used for retirement savings and this can be partially true in some cases.

      You need to decide what a reasonable retirement income will be for you, and where that money will be coming from. Speaking generally, a renter, not having house expenses, may be able to save more, and someone who can afford only the less expensive house may not need as much future income.

  3. Joel on March 19, 2014 at 3:15 pm

    Thanks for that Boomer. Yes I live in Victoria, BC where a decent family home to raise a couple kids will cost you well over 500k so I am presuming that my wife and I will downsize down the road if and when the kids move out. That would potentially result in a nice little nest egg (for empty nesters!) that could be used to help fund retirement whereas someone with a lower value home would not have this opportunity to the same degree.

    • Elizabeth on March 19, 2014 at 5:44 pm

      I guess it depends on who is going to buy those big homes? Much of Gen X isn’t in a position to buy boomers’ big homes when they downsize, and I doubt Gen Y is going to be any better off. I suspect in some locations, there’s going to be a lot of competition for small homes and condos.

      A house is only worth what someone is willing to pay for it. When people sell, they often forget all the interest they paid over the years when they consider their profit.

  4. Gregory D on March 19, 2014 at 5:03 pm

    Re: Large purchases … Your negotiating power may go a lot further when you have a significant down payment, or pay cash for a car.
    I keep hearing that dealers benefit significantly from financing vehicles, so having a lot of cash may not be as beneficial as one would think.
    The best way may be to get negotiating tips online before making the purchase.

    • Boomer on March 20, 2014 at 8:45 am

      @Gregory D: When we purchased our most recent vehicle we went through all the financing options with the dealer. Later we made a substantially lower cash offer that was accepted.

      • Gregory D on March 20, 2014 at 11:56 pm

        Thank you for that update, I was bothered that because I would not need financing, getting a good price would be impossible. Mind you, when I bought my wife’s car without financing, I was able to use an offer from another dealer to get the best deal possible, so that might be another tactic to use.

  5. Nik @ Midlife Finance on March 20, 2014 at 12:55 am

    My goal in life motivates me to save not just 10% of my income, but 20% of it. We are totally unsure what will happen in the future. and to become financially prepared is truly an awesome thing to do.

    Creating list of things that you wanted to achieve in the near future will organize your saving process, might better, you should start doing it.

  6. Mclain on March 20, 2014 at 8:24 am

    I am currently saving/investing 48% of my income – trying to hit 50%. I’d like to purchase a rental property at some point but for now I’m just hoarding cash. It’s seems I be my new hobby lol

    • JohnnyStash on March 20, 2014 at 9:46 am

      Good for you. What do the wife and kids think about that?

  7. Mclain on March 20, 2014 at 10:34 am

    I’m divorced. Lost everything I worked 20 years for and ended up bankrupt 2 years ago so I am starting all over again…one of the resons I am so aggressive in my savings. I have a lot of catching up to do.

  8. KC on March 20, 2014 at 9:14 pm

    After spending all my savings and racking up debt to try and get my business off the ground for a year, I’m now saving 10% of my gross every month to build up my savings (aka emergency fund) while sending about 60% of my after living expenses to my debt. It paid off recently when I got a surprise and very necessary big bill that I was able to use my savings for rather than using debt again.

    My priorities will change after a year of saving my cash and debt paid in full. 🙂

  9. Money Saving on March 21, 2014 at 12:30 pm

    I’m saving to invest so I can retire by 45.

  10. Sean Cooper, Freelance Writer and Blogger on March 21, 2014 at 4:18 pm

    Great article, Marie. Although my goal is to pay down my mortgage before I reach age 31, I still have $10K in savings set aside in my emergency fund. I’m glad I have those savings, as my home recently got a crack in the foundation, which will cost thousands to repair.

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