How do you save money for the future? We have a few different systems, depending on our goals.
For retirement:
We are incredibly fortunate to have a strong pension plan (which I hope will still be there when we need it – 2031 is still a long time away!), but in addition, my husband and I each have RRSPs, funded by preauthorized withdrawals made from our chequing accounts each month. Every couple of years we take a look at our budget and decide if we’re able to increase our contributions, but at this point we still aren’t maximizing what we could be doing. One bonus with RRSPs is that they do provide a tax break, which means some money back at the end of the year.
For the girls’ education:
As soon as Frannie was born, we opened a family RESP, and used the Universal Child Care Benefit ($100 per month, per child from the federal government) to get it started, since it was new income that we wouldn’t miss. Once I was back to work full time after both girls, we increased our monthly contributions. It’s smart to maximize, if you’re able (the government will add 20% of what you put in, to a maximum of $500 per year, per child – which means if you can put in $2500 over the course of the year, you’re making the most of your money.) We still haven’t decided what to tell our daughters about this chunk of savings. My husband and I each paid for our own post-secondary education, while I admittedly had the luxury of living at home and using one of my parents’ vehicles, but I did cover almost all of my tuition and books myself through part-time and summer jobs. I would never want their opportunities to be limited because of money, but I also don’t want them to go through high school assuming they have some sort of free ride. I’d like to see them working and saving, just as we did. I’d love to hear others’ thoughts on this one!
For large purchases:
We have monthly budgets (including set amounts for personal shopping/entertainment), and the difference between our income and expenditures goes into a joint account at the end of the month. Originally we were very strict about what we would use it for, e.g. a big trip, purchasing a large appliance, etc., but now it tends to be used for Christmas shopping, repair bills, anything not in our monthly budget. Fortunately our tax return is timed perfectly to fund our March Break trip (I know the financial experts wouldn’t approve of that but hey, I’m being honest!)
A great way to make sure that your future goals are funded is to pay yourself first (I can still hear Monica’s dad on Friends telling her “10 percent, in the bank!”) and a great way to do that is to have the withdrawals set up through programs like the TD Automatic Savings Plan. That way you don’t have to worry about transferring amounts each month, and the money is out of sight, out of mind…and ready when you need it in the future!
As I mentioned above, I’d love to know what other parents plan to do about their children’s post-secondary educations…are you saving for them or expecting them to do it on their own? Is it a choice you’re making, or financial necessity? How will their opportunities be different from yours?
Disclosure: This post was sponsored by TD. Opinions are, as always, my own.
Savings…hmmmm!! I laugh with your details of budgets, expenditures! Those words do not work in our home. We have tried budgetting but totally suck at it. I find we are better at forced savings: when we were both working regularly (for those few magical years) we used a financial advisor and set up automatic withdrawls for a long term savings account, and a rainy day account. We also have some retirement options through work, but none equal what you guys have with the teachers- that is one thing I do regret, now that I am not 22 any more. My job is wonderful, but I really get peanuts for retirement with my current employer. I would have had to sacrafice a lot of my wants to take a job with a good retirement plan (in hospital vs in community) so I choose to go with my heart and not my wallet and have a job I really enjoy- but this means I have to be a lot more proactive on my end for retirement savings. I consult a financial advisor regularly because I am terrible at this. And I kind of hate it! However, saving money has proven to be wonderful for us in a few circumstances: a few years ago we needed major repair on one of our vehicles. Traditionally we wouldn't have had cash to pay for it, but because we listened to our financial advisor BAM! We were able to pay for the repair. Thats such a good feeling.
With our children, I am like you. I am still actually paying for my first (and second) degrees! I know, it is silly but the interest rate is extremely low so our financial advisor won't let us pay it off any faster. We have RESPs as well, started when our children were infants. And it is great to watch them grow, and to maximize what the government contributes. We did put them on hold for 2 years while I went back to school (not an easy decision but we figured the investment would outweigh the risk here). I want to be able to help my children with their educations, absolutely. I also don't plan on giving them a free ride. I want them to contribute toward their education as well. I had a few friends in university whose parents paid for everything. EVERYTHING! One didn't bother to finish her degree. The others partied and wasted money- it made me drool!! Haha, my purse strings were definately a lot tighter than theirs. I am proud to have put myself through school unaided. However, I do wish my parents had bestowed SOME financial advice upon me. I had no concept of saving, and budgeting. So I had to learn the hard way, and I did eventually. I plan to teach my children to save 20% from the first babysitting/grass cutting job. In fact, to start I plan to make them hand it over to me! Once they see the value in that, we can work together to set up bank accounts- which will be joint for a long time. I don't want to see them make bad financial decisions that they will regret one day!
I DO NOT however support these new Legacy Planning initiatives. We had one financial planner try to convince us that we should set up a legacy plan for our children's grandchildren! Er, sorry- I'm just not in that place in my head, or in my bank! Geesh, wouldn't that be nice!!
We put a fixed amount that is automatically withdrawn into the "Family RESP" account each month. We don't intent on paying both kids' ways (if they choose post sec), but we do plan on helping b/c the costs are so high these days, they would likely be in debt forever 😉
GREAT post!
As far as OUR savings goes – we had intended on saving for a trip to Disney b/c we would really like to go there with the kids, but every time we think we might be close, we have a BIG house expense. This past summer it was the a/c and furnace and this spring is the roof 🙁