I’m Just Starting Out

When it comes to saving for retirement, a Registered Retirement Savings Plan (RRSP) is the #1 choice for most Canadians. A Tax-Free Savings Account (TFSA) can also be used to save for retirement, but it gives you the flexibility to save for short-term goals, too.

Here are a few ways the RRSP and TFSA stack up:

• Your savings in an RRSP grow tax-deferred while your savings in a TFSA grow tax-free.
• RRSP contributions are tax-deductible, helping you to pay less tax in your earning years. TFSA contributions are not tax-deductible.
• You have to earn an income to put money in an RRSP. With a TFSA, you can contribute even if you aren’t working and earning.
• You can’t keep saving in your RRSP after age 71—a TFSA lets you make contributions for life.
• Withdrawals from a TFSA are never taxed. Withdrawals from an RRSP are taxed the year you withdraw the money.

To compare more features and benefits, see TFSA vs RRSP vs eSavings.

Finding money to save can be tricky sometimes, but there are some good guidelines you can follow that can help you put a little bit aside each month.

One great practice is to pay yourself first. That is, with each paycheque, pay yourself a set amount for your savings. It’s easier if you think of it as something you have to do – like paying a bill.

Another way to make saving easier is to set up automatic transfers between your chequing and your savings accounts. If you align it with the day you get paid, you will hardly notice the money coming out.

Finally, if you’re an RBC Online Banking client, you can use myFinanceTracker to track your transactions made with your RBC debit or credit card. With a real-time view of your money, you can more easily identify money you can redirect to savings.

Even if you put a small amount aside on a regular basis, your savings will grow over time.

If you’re comfortable with the possibility of fluctuating returns and plan to invest for the long-term, stocks (also known as equities) can offer you several benefits:

• You have the opportunity to earn better long-term returns on your savings (when compared to cash and fixed income investments)
• You can earn dividends and capital gains with stocks
• You can invest in individual companies or markets that interest you

The goal of a budget is to keep track of your money, and make sure you don’t spend more than you earn. A budget can also help you identify ways to save some money each month.

To start a budget, you’ll need to record all of your expenses over at least a month. It’s important to be realistic and account for everything, so that you can stay on track. Once you’ve done this, you’ll be able to easily see the difference between the money coming in, and what’s going out. If you’re spending more than you’re earning, you’ll need to prioritize your expenses. But, if there is a bit of money left over each month, it’s a good practice to start putting even some of it aside in savings.

There are some really handy and easy-to-use online budgeting tools available that can help you get started.