How to Make Your Money Work Harder in 2024

If you’ve ever stocked up on fruit at a grocery store to take advantage of a sale, you’ll know that buying too much can be a risky game. You might save some cash, but it could also be a waste if your produce goes bad before you’ve had a chance to use it.

Having excess savings simply sit in your bank account too long can also be wasteful. While money may not spoil, it can lose value over time due to inflation. Indeed, with prices rising by more than 3 per cent annually – above the Bank of Canada’s 2 per cent inflation target – over the past two years, it’s important that your money works hard in order to meet your financial goals.

Here are some ideas that can help you get more from your dollars in 2024.

Consider bonds again

For much of investing history, people were happy to hold a portfolio consisting of 60 per cent stocks and 40 per cent bonds. Equities helped boost returns, while bonds provided steady income. The two asset classes would also balance each other out as their values tend to move in opposite directions.

Unfortunately, 2022 was a tough year for stocks and bonds – which both sank at the same time. But now, with bond yields higher than they’ve been in a long time thanks to central banks boosting interest rates over the last two years, it may be time to add more fixed income to a portfolio, says personal finance columnist and author Jonathan Chevreau.   

The changing rate environment also has him more interested in something few have talked about for a while – the Guaranteed Investment Certificate (GIC), a secure investment that guarantees 100 per cent of your principal plus interest if held for their term. Today, GICs are offering yields of close to five per cent, up from just one or two per cent in 2021.

Revisit your asset mix   

Markets are constantly moving up and down. With stock markets doing relatively well in 2023, there’s a good chance that you have more money in equities now than you may have had at the start of the year. Depending on what you hold, your allocation to stocks could be a lot higher than where you typically would like it to be – maybe you’re now holding 70 per cent in stocks versus the 50 per cent you’re more comfortable with. It’s called portfolio drift, and it’s a common occurrence¹ for investors.

Now’s the time to get your portfolio back in balance. Not only will you feel better about your money when markets inevitably bounce around again, but over the long term, research shows you could end up with slightly higher returns than if you simply let your allocations slide. According to Morningstar^{2, 3}, which looked at market data between 1994 and 2020, annual rebalancing resulted in a 6.13 per cent 20-year annualized return versus a 5.79 per cent return for no rebalancing.

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Max out your tax savings

With costs on just about everything increasing, finding ways to keep more money in your pockets is critical. Taking advantage of registered accounts like the Registered Retirement Savings Plan (RRSP), Tax-Free Savings Account (TFSA) or the newly launched First Home Savings Account (FHSA) are some good options for better tax efficiency.

These are tax-advantaged accounts that help you grow your money. With the RRSP, you only pay tax when you withdraw (ideally in retirement when your income may be smaller and you may be in a lower tax bracket). Money inside of a TFSA is not taxed on withdrawal. Chevreau says he has become a fan of the FHSA, which launched in April 2023. You can deduct contributions from your income like with an RRSP (and potentially get a tax refund) and then withdraw without paying anything, like with a TFSA, as long as the money is used to for a qualifying purchase.   

If you already have a TFSA but want to take advantage of the new FHSA, you could transfer up to $8,000 from your TFSA to an FHSA and deduct the FHSA contribution from your income, he says. Then, if you get a refund, you could return some of the money back into your TFSA the following year.

The more you can save in these kinds of accounts versus non-registered accounts, which are taxable, the more money you can potentially put to work for you.

Pay down debt

Before you can make your money work harder, you should consider paying off any high-interest credit card loans. With that kind of debt – and many cards charge upwards of 21 per cent interest on a balance – your money is working harder for your lender instead of you.

Most finance experts, including Chevreau, suggest paying off debt before doing anything else. Once you have a clean statement, you can start putting the money that you would have used to service your loans into the market. “If you want your money to work harder for you, the best way is to eliminate all debt,” says Chevreau. “It’s almost a no-brainer.”

While there are many other strategies you can use, these four will go a long way to helping you save even more in the coming year. Consider speaking with a financial professional who can help to guide your saving and investing strategy, or try MyAdvisor, a free digital advice platform to help you stay on top of your money and reach your goals.

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 ¹RBC Global Asset Management, The Benefits of rebalancing your asset allocation over time

 ² Morningstar, Why rebalancing almost always pays off

 ³ Morningstar, Why rebalancing almost always pays off

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