What Will It Take For You To Save More This Year?

What Will It Take For You To Save More This Year?

I know it can be tough to save money. It’s even more difficult to up the ante and save more year-after-year. But saving is necessary to meet both our short-and-long term financial goals. Without any savings, you’ll live paycheque-to-paycheque (or worse) every month with no retirement plan whatsoever.

Related: Retirement planning for late starters

So what will it take for you to save more this year? Some people start off small, saving two or three percent of their salary, and that’s fine – every little bit counts. But many of us short-change our retirement by not finding ways to increase that amount every year. Here are four easy ways to save more in 2022:

Take up a challenge

The 52-week money saving challenge has been pinned, posted, and shared across social networks and blogs to help inspire people to save. Ordinary Canadians, who’d typically only post about their vacation and dining experiences, take up the challenge each year and talk about money. Fantastic!

52 week money saving challenge

The 52-week money saving challenge is simple: Save $1 in week one, $2 in week two, $3 in week three, and so on until you have about $1,400 saved by the end of the year. Or, increase the degree of difficulty and try to put away $10 in week one, $20 in week two, $30 in week three, and so on until you’ve saved nearly $14,000.

The best variation I’ve found is the reverse challenge where savers put aside $52 in week one, $51 in week two, $50 in week three, and so on. The reverse order works well because the bulk of the saving happens at the start of the year while you’re still motivated.

Let’s be honest – who’s going to remain excited after saving a measly $10 in January? But with the reverse challenge, come December, when money is tighter, the amount you need to save goes down as your spending is likely to increase. You’ll also get compound interest working for you earlier, and the habit of saving more early on just might stick with you for the entire year.

Find your match

Many employers offer a contribution-matching savings program. But according to industry experts, Canadians are leaving as much as $3-billion on the table by not taking advantage of these programs. Employers are only paying out between 40-50 percent of available matching funds.

Related: Why putting off retirement savings can cost you

Some employers will kick in 50 cents for every dollar you contribute, while others will match you dollar-for-dollar. One could argue that skipping out on an employer-matching program is a worse financial move than carrying a credit card balance for a year. That’s because you’d give up a guaranteed return of between 50-to-100 percent in order to pay down credit card debt at 19 percent.

I get it, most of these plans are voluntary and that portion of your salary feels better in your bank account than in some group plan that you can’t touch until retirement. But if your employer offers you free money, free money that doubles your retirement contribution, you take it!

The same goes for government matching programs like the Canada Education Savings Grant, which provides grants to RESP contributors – 20 percent on every dollar of the first $2,500 you save inside an RESP each year. That’s up to $500 in free money for your child’s education.

Bank your raise

One sure-fire way to boost your savings from one year to the next is to bank your raises. Okay, salary increases may be few and far between in this economic climate. But if you are managing to get an annual increase, even if it’s just cost of living, here’s an example of how to make it work for you:

Most retirement calculators assume that you save a fixed amount every year and that number doesn’t grow with inflation.

John is 25 and earns $50,000 per year. He can afford to save $250 per month ($3,000 per year) toward his retirement.

The conventional “pay-yourself-first” approach doesn’t assume any increase in that amount over time, and so after 40 years of saving $3,000 per year John will have $480,000 saved for retirement. Not bad.

Related: A simple way to boost your retirement savings

But how much would John accumulate if he simply increased his savings rate along with his two percent annual raise? It doesn’t sound like much, but it would mean an additional $145,000 at retirement – or $625,000.

Build on what’s already working

Most of us have already have some sort of automated savings plan in place, whether it’s a percentage of income that gets funnelled into our RRSP or TFSA, or monthly contributions to our child’s RESP. Even your mortgage payment is a forced automated savings plan.

Build on the good things that you already have in place. Increase your monthly mortgage payments by $50 or $100. You’ll easily take a few years off the life of your mortgage – especially if you make a habit of increasing your payments annually.

Related: How to pay off your mortgage faster

Keep bumping up the contributions to your RRSP, TFSA, and RESP until you start maxing out the annual limits. Once you get there – see if you can catch up on unused contribution room to further bolster your savings.

Final thoughts

There’s always room to improve our finances each year, but often we get complacent with our savings plans and fall victim to financial inertia.

Find a way to grow your savings every year, whether through a fun challenge, by taking advantage of employer and government matching programs, banking your raise, or by simply building on what’s already working for you.

What will it take for you to save more this year?

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  1. Brenda on January 5, 2022 at 1:03 pm

    Our family’s approach has been to keep both the savings rate and savings amount constant or slightly increasing each year. When there are raises or bonuses, most of the net increase goes towards savings. This keeps an upper bound on lifestyle creep, we don’t notice the incremental difference, and the effect has compounded greatly over time. In the 15+ years of doing this, there has only been 1 year where the savings dropped and that was the year I transitioned to self employment. We made up for it the following year though.

  2. Frito on January 5, 2022 at 1:22 pm

    The flip on the 52 week challenge is quite interesting. I’ve known some people who have tried it and of course failed miserably – especially when the higher amounts started cutting into their fun money! IMO the only thing that works for people who aren’t natural savers is auto transfer to savings. $25/week will get you about the same result as the challenge game and is more likely to actually happen.

    I worked in payroll years ago and remember when they stopped the Canada Savings Bonds payroll deduction program. We had to inform participants of the change and tell them they had to transfer to a personal account so they could manage the funds themselves. One senior manager showed up at my door asking what I was talking about – she had no idea she had been allocating hundreds of dollars each year to CSB after signing up for it by filling out her hiring paperwork. (obviously never looked at or understood her pay stub!) She checked CSB and found she had over $18K she didn’t know about! Best auto save result ever!

  3. Pam on January 10, 2022 at 12:28 pm

    I have to put money away as soon as I get it (dividend/bonus) or it eventually gets spent. My bonus this year is going to get invested pretty much as soon as it hits my bank account. Should up my investment savings this year but I never really track my savings rate overall. I should start doing that this year. Savings overall – are on track.

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