WHETHER you’re starting with $5 or $50, developing the habit of saving your money each month is more important than the specific dollar amount saved.
That’s the mindset that could help many Canadians overcome the concern they aren’t saving or investing enough, said Pat Giles, Vice-President, Saving and Investing Journey at TD.
“I’d say that there’s a myth that continues to persist — that you need to have a certain dollar figure accumulated before you can start investing,” Giles said.
“But one of the best ways that you can help save for the future is through a pre-authorized purchase plan. This is where you’re going to contribute a set amount to your investments every week or every month — even if it’s a small dollar amount.”
Only 49% of Canadians believe they are putting away enough money to meet their long-term financial goals, according to the results of a new TD survey[1] . A lack of financial knowledge was one of the big barriers Canadians cited in the survey.
Forty-five per cent said they weren’t confident in their investment knowledge.
The good news is that it’s never too late to get educated and start investing, no matter where you are on your savings journey, Giles said.
“I think what we heard from this survey, loud and clear, is that Canadians polled told us they would feel more confident if they spoke to a financial professional,” he said.
A TD Personal Banker can help Canadians understand the different savings options available to them, help to expand their financial knowledge, and educate them on getting started in investing.
Using TD Goal Builder, a TD Personal Banker can provide customized investment advice to help customers work toward their financial goals, whether they’re saving for retirement, buying a house, or sending their kids to university.
Putting investments in an RRSP vs. TFSA vs. FHSA
The survey found that more than a third (35%) of Canadians are contributing to a savings account only instead of contributing to a Tax-Free Savings Account (TFSA), Registered Retirement Savings Plan (RRSP), or First Home Savings Account (FHSA).
It’s not surprising that a challenging economy has resulted in more Canadians keeping more liquid cash in savings instead of an investment account, Giles said.
“But what [this data point] tells me is that not enough Canadians are taking advantage of the registered plan types we have in this country, especially the TFSA where you get the benefit of tax-free growth [on your qualified investments],” he said.
Less than a third of Canadians polled — 30% — feel confident in knowing when to contribute to an RRSP versus a TFSA, the survey found.
With an RRSP, Canadians can make tax-deductible contributions. RRSP account holders are likely to pay taxes on withdrawals during their retirement, a time when their income tax rate is typically lower than when they were working.
An FHSA, in some ways, combines the benefits of both the TFSA and the RRSP, Giles said.
“I believe the First Home Savings Account is an absolute must-have for any Canadian that’s thinking about buying their first home in the future,” he said. “It’s like an RRSP on the way in, where the contributions are tax deductible. And it’s like a TFSA on the way out, where returns on qualified investments are tax free, when a qualifying withdrawal is made for a first home.”
Gen Z leading the investment pack
Overall, the survey found that only 58% of Canadians polled are making investments at least once a year. The survey also found that one-third (34%) of Canadians have never invested — ever.
But Gen Z is the outlier demographic. Sixty-eight per cent of Gen Z Canadians surveyed (those born between 1997 and 2012) have consistently invested funds at least annually, the highest across any age group.
“I certainly think this generation has greater access to information than previous generations,” Giles said. “I think that previous generations have also learned from mistakes in the past, and I think are passing [what they learned] along to their children.”
Gen Z stands to benefit from their proactive investment habits, because the time your money spends in the market — longer is better — matters more than the exact moment you decide to invest, he said.
In the survey, 30% of Canadians polled said they don’t have an investment plan. Of the those surveyed who don’t have a plan to achieve their financial goals, 29% said they don’t believe they have saved enough money to warrant a personalized plan, and 20% said they don’t know where to start.
“This is where a TD Personal Banker can help,” Giles said. “There’s no fee to book an appointment.”
“You can find them at any of our branches across the country. There’s no minimum amount of money you need to have in order to meet with one,” he said.
“These are individuals who have the knowledge and experience in investing, and they help Canadians with a wide range of investment topics.”
