Tuesday, April 5, 2011

5 Tips for a Chubbier Savings Account

Preet Banerjee wrote a piece for the Globe and Mail today about ways of saving that include voluntarily increasing your income tax deductions so that Revenue Canada acts as your banker by holding on to your money until refund time. He also suggested setting up an automatic savings plan at a real bank that pays interest while your money grows.

Though, as Preet also pointed out, there is something awfully tempting about both a growing savings account and a lump sum tax refund. Something that stops many people from letting their savings get chubby.

Last night after swim practice, I treated myself to a hot tub with some of the other moms. As we enjoyed the jets, bubbles and the soothing absence of children, one mom lamented that stores "around here" never seem to close. "In some European cities," she said, "it's almost impossible to shop on a Sunday. You can't even get groceries. I wish it was like that here." Her comment made me wonder how we can afford all this 24/7 shopping.

That's easy. It's called credit. Our economy says to us, "Don't worry about it, Mom! You can get whatever you want, whenever you want and you don't even need to have any money in the bank!" No wonder it's so hard to build a chubby savings account when it's so easy to keep letting the money pour out.

So if you are one of those people who struggles to keep the financial weight on, here are few tips from an avid (dare I say obsessive?) saver.

5 Ways to Bulk Up

ONE Change your way of thinking. Fat is good when it comes to money. The more you amass in your savings account the more you can potentially earn in interest or in investment income. Seriously, passive income (that's when your money earns money) is totally where it's at.

TWO Respect free money. I'm 42 and I still get money in cards from family at Christmas and for my birthday. You didn't earn it so don't spend it. Put any free money (refund, gift, etc.) that comes your way directly into your savings account.

THREE If you suddenly decide that you want something, don't dip into your savings to buy it and don't use credit either. Figure out a fresh, temporary way to earn the required cash. Do an odd job for a neighbour. Do some childminding. Sell something that's been sitting around taking up space. Be creative.

FOUR Do a cost analysis of your favourite forms of entertainment and drop the expensive stuff. What do you do for fun? Create a list and beside each activity write down how much it costs, how many hours of entertainment you get and then figure out what your cost per hour is.

Example: A 3D movie night in the theatre for my daughter and I costs $28 (just for the movie, not including snacks and transportation) which works out to $14 per hour for a two-hour outing. On the other hand, a 500-piece puzzle costs us about $20 and give us more than 10 hours of fun at $2 per hour. For every 3D movie we decide not to see in the theatre, I put $28 into my savings account.

FIVE Passive income rules! I know this was tip number one but if there was ever a carrot for saving money it's this. The more money you have working for you, the more money you will have down the road. I hate to admit it but Kevin O'Leary's goal of going to bed richer at night than he was in the morning is smart. Every dollar that grows in your savings account makes you richer every day.

If however, you don't think that any of these tips are going to help and you are interested in the "Revenue Canada tax-refund savings strategy" or in setting up an automatic deposit, check out Preet's Globe and Mail article by following this link.

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net.

6 comments:

  1. Laura,

    What about risk management? I think Kevin O'Leary talked about that awhile ago.

    What if you could have better protection pay less taxes, and have more money in retirement?

    Saving is good and important. Like having gas in your car. Risk management is like insurance. Would you drive without insurance? Which is more important? You need both.

    cheers,

    Brian

    Cheers,

    Brian

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  2. @Brian. Yes, Kevin did worry about the danger of my becoming "road pizza." Risk management as an aspect of saving sounds intriguing.

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  3. I don't like Preet's advice of trying to get a tax refund, but I can see how some people might. You're absolutely right about the passive income. That's where its at!

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  4. @Perfecting Parenthood. Exactly...passive income. Have you started teaching your kids about that yet?

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  5. @ Laura,

    You can set up your money so one dollar works like 2 or more dollars so you can have more protection, less risk and more money in retirement.

    When you read the book (I sent) things like taxes, inflation, compound interest, RRSPs and much more, are things to avoid as best as you can.

    Brian Poncelet, CFP

    www.rightinsurance.ca

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  6. Practical means you have here. With these ideas, one can surely bulk up their savings account.

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