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Email this12:55 pm
November 4, 2014
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I always heard some personal finance people saying that try to save at least an hour a day that you would of made from your paycheck. They were including even the weekend, Saturday and Sunday too.
This was when TFSA's did not exist yet but they were talking about using this money towards RRSP contributions and RRSP contribution room if people had any.
Assuming a person earns $15.07 an hour and they saved one hour, this would equal about $5,500 a year which is basically their maximum annual TFSA contribution.
Many people may not understand the TFSA or investments in general and may shy away from doing anything with TFSA's but they just put it in a regular GIC for 1 year or maybe 18 months or perhaps a savings account or as many do not save much at all. They say why bother saving or doing anything with a TFSA.
If they do nothing else and just start saving as early as possible using a simple, TFSA strategy by maximizing their TFSA's of $5,500 a year with depositing saved money in 3.00% GIC's, they can have close to or have $500,000 or more in their TFSA's by retirement.
A 23 year old that does this until they get OAS, as current OAS pension eligibility today, at 67 years old for example will have $504,459. Every family member should try to do, strive at the bare minimum to do this to have something modest for their future.
If every family member would have $500,000 in their TFSA's at the very least, a family of 4 would have $2,000,000 income tax free. It is not the best strategy or a home run strategy for one's TFSA's but it is at least simple and it is the least they can do to save and accumulate a decent amount in their TFSA's
I'm sure there are better ways to invest TFSA's and have $750,000 to $1,000,000+ in their TFSA's earning much higher rates than 3.00% but it is better than those that say they would rather have it in plain, taxable term deposits, GIC's and savings accounts earning 1.50% to 3.00% but paying income taxes at maybe 20% to 33% at the minimum.
This is just some suggestions to make a TFSA simple but I know many will say it is not good enough. It is a bare minimum to maybe a modest amount of money with one's TFSA's. Take care and do what is best for yourselves.
1:20 pm
December 23, 2011
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Greg for us older members I would imagine most of us did not do any real serious saving until we were mortgage free. For those that had a great income your scenario is fantastic. But not to discourage any one from saving for the future and can resist from making a withdrawal...any amount would be good.
The RRSP being tax deductible would still be an attraction for the younger folks and it is a little more difficult to withdraw while still bringing in income. For the RRSP folks it is important what you use the income tax refund for; as a result of a a RRSP contribution. Ideally back into RRSP and now a days to TFSA.
For the folks that don't need a tax refund from a contribution to an RRSP then TFSA for sure!
For those with a lot of income to set aside then a combination of NOT exceeding your TFSA, RRSP and spousal RRSP limits.
Based on Greg's numbers above if the RRSP contributions dwindle and TFSA increase.....what will the government tax in place of the RRSP income?
1:25 pm
November 4, 2014
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A combined simple maximized RRSP and TFSA annual contribution, 3.00% GIC strategy may also be a decent plan to consider.
RRSP's may not be fully taxable and each individual could have as much as $600,000 in combined RRSP's, TFSA's, consisting of $500,000 RRSP's and $100,000 in TFSA's.
Although, the above simple TFSA strategy would probably work better for most people that are modest income earners. Take care and do what is best for yourselves.
1:38 pm
November 4, 2014
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Kanaka, I think this is why there is a great push and talk about in recent years for new and increased taxes for environmental, sales, services, consumption, infrastructure, transit, tobacco, alcohol, carbon, gas, excise taxes, energy taxes, property taxes, education taxes, user fees, garbage taxes, development fees, land transfer taxes, increased water rates revenue for municipalities etc.
Don't forget about higher payroll, personal income taxes, health taxes and health related user fees, taxes, premiums, surtaxes as well is a real possibility. They can find new and higher taxes in many different places.
Even possibly some new taxes on some businesses as well . Kanaka, I know it is difficult to save and this is why debt reduction is probably the best way to accelerate savings for all people.
They have to choose to save that money or a good portion say 60%, 70% in order for things to happen.
Kanaka, you have to take into account that if more people do not contribute to RRSP's, the government is already saving the billions of income tax refunds and lower tax bills that people are seeing within a year or immediately.
Also, the much lower interest rates on their debt are saving hundreds of millions to 1 to 2 billion dollars a day for all governments is also a factor that is keeping their government expenses, costs lower.
Take care and good points, Kanaka.
4:07 pm
August 28, 2013
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This all sounds good - on paper. But it never works. Why? Because humans want instant gratification. They want stuff NOW. Every kid want that tablet and phone NOW! Yuppies want that SUV (BMW, Lexus) NOW. Leas of $600 a month. No problem. But everybody will see what I drive. Should I go further? To save one has to have iron fist discipline. Nobody in his/her 30-40s think of retirement. And imagine if everybody would save??? Capitalism will crumble as nobody will buy all that s..., sorry, stuff which is mostly for show off. When was the last time you saw somebody with book in hand? Everybody caries phones in hand like world needs their advice and they have to be on-call 24/7. 99% phones are used for games. Color, sex, age does not matter. Live in parallel world, forget present.
6:09 pm
December 23, 2011
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JustMe said
This all sounds good - on paper. But it never works. Why? Because humans want instant gratification. They want stuff NOW. Every kid want that tablet and phone NOW! Yuppies want that SUV (BMW, Lexus) NOW. Leas of $600 a month. No problem. But everybody will see what I drive. Should I go further? To save one has to have iron fist discipline. Nobody in his/her 30-40s think of retirement. And imagine if everybody would save??? Capitalism will crumble as nobody will buy all that s..., sorry, stuff which is mostly for show off. When was the last time you saw somebody with book in hand? Everybody caries phones in hand like world needs their advice and they have to be on-call 24/7. 99% phones are used for games. Color, sex, age does not matter. Live in parallel world, forget present.
Justme....right on! I am in my sixties with kids in their forties. Have you ever heard this one.....your childrens retirement will be funded from YOUR retirement savings????? No doubt as you describe how some of the young folks manage their funds....is true.....for what percentage.....I don't know. Living not with in their means but living within their monthly payments.
10:01 pm
August 9, 2014
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This desire for instance gratification is more or less cause by media as they allow us to access information instantly to the point that they are being throw at our face (think of News report) , unlike the old time where you need to figure it our gradually (books). Our education system that focus on instantly rewarding our kids as soon as they did something right also contribute greatly here.
From a student with signification interest in sociology
Kanaka, that sounds very alarming. Something that my parents certainly does not allow despite they are wealthy (they manage a large pool of asset they can rival or even overtake what SD2013 have, which most money are going to be use for charity when they pass away)
10:26 pm
October 21, 2013
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Very interesting comments from JustMe and kanaka.
I'm in the same age group as kanaka.
I do think, to be fair, that there are those in the younger generation who are not into acquisition and what used to be called "conspicuous consumption". You'll find them shopping in vintage stores, using the public library, scrutinizing penny-pinching-and-squeezing websites like this one, working for the environment, and as members of car-sharing organizations, for example.
I never appreciated it when I was young when my generation was slammed for certain behaviours, and I think we should be cautious about painting everyone with the same brush.
There are a godzillion ways to spend less and save more, if you really want to. I think I could write a book on that subject that would out-frugal the ones on the market (which I only read as library copies, of course)!
"Living not within their means, but living within their monthly payments." - great line, kanaka! And so true. For some, with the high mortgages of TO and Vancouver, it's all but inevitable, and scary. I would hate to be trying to enter that market now.
7:15 am
November 4, 2014
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JustMe, their economic policies and financial engineering all sounds good on paper too but we all know how bad that is working out.
Low to ultra low rates, negative interest rates, QE1, QE2, QE3...., the monster of thousands of pages called the income tax code and income tax act, over indebted consumers and binge spending, negative to low household savings rates, house prices that are truly inflated from artificial means by the world central banks, The Federal Reserve, Bank of Canada, Bank of England, ECB, Bank of Japan, corporations hoarding hundreds of billions dollars in cash and not giving decent raises to workers for years, many tax increases, fee increases over decades etc.
I can go on and on so their form of capitalism almost crumbled many times, 2000-2001, 2003-2004, 2007-2009, so that did not work that well either.
Your point about if everyone saving too much money and not spending much is not going to happen because everyone is and does not think the same and do not have the same income, asset, investment amounts that will help them to do this.
I just brought up this simple TFSA topic because maybe it would help those that want to save money in their TFSA's but think that it has to be complicated and overwhelming. I said in my initial above post that it is not the best TFSA but that it is just simple.
I don't think that they are finished yet when it comes to the economy. Take care and people out there try not to get into debt this Christmas or holiday season. Indulge but don't over do it.
7:27 am
November 4, 2014
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Kanaka and Jon, these are TFSA's for their retirement and if they want to leave something behind for their family or others then that is their choice.
The fact that there are many young people that spend their parents money is not a new thing. Why do you think that there are trust funds, annuities and other provisions in wills, trusts etc. set up from more financially well off and wealthy individuals.
It is to preciously to make sure they are not spending all their family's assets, investments left to them during and after they have passed away.
They already made this very difficult for most savers and alot of investors with low interest rates and inadequate savings, investments accumulated over decades, so I doubt that is going to happen.
They are not going to have hundreds of thousands or millions of people in Canada living off their parents money in which becomes their money after their parents are deceased.
Loonie, there are many ways to save if people really have the desire and planning but this unfortunately is not possible for lower income individuals.
All good and interesting points, comments and take care.
9:15 am
December 23, 2011
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Greg Franklin said
Kanaka and Jon, this are TFSA's for your people's retirement and if they want to leave something behind for their family or others then that is their choice.
The fact that there are many young people that spend their parents money is not a new thing. Why do you think that there are trust funds, annuities and other provisions in wills, trusts etc. set up from more financially well off and wealthy individuals.
It is to preciously make sure they are not spending all their family's assets, investments left to them during and after they have passed away.
They already made this very difficult for most savers and alot of investors with low interest rates and inadequate savings, investments accumulated over decades, so I doubt that is going to happen.
They are not going to have hundreds of thousands or millions of people in Canada living off their parents money and which becomes their money after their parents are deceased.
Loonie, there are many ways to save if people really have the desire and planning but this unfortunately is not possible for lower income individuals.
All good and interesting points, comments and take care.
What I am saying is....."some" younger folks have totally mis-managed the use of credit, loans and mortgages.
See here. http://www.moneysense.ca/debt/.....ble-income
And they "expect" our retirement savings for their retirement.
Recently a young fellow I know, in his fourties, was paying a 7 year loan on a SUV. He was 2 years into paying it off. And the dealership told him that they had clients that were interested in his vehicle. They let him take home a larger 2014 SUV and told him for only $40 a month more. So here he is with family and now 9 years to pay off a vehicle loan, which is absurd in my opinion. His financial decisions unfortunately are genetic.
I took a business course in grade 10 and the teacher had the best ways ever to get his point accross and he covered credit, car repairs, banking etc. And I owe a lot of my financial smarts to him.
10:07 am
November 4, 2014
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Kanaka, unfortunately there will always be financially irresponsible people with some that are clueless and others that choose to be financial morons even if they know it is bad financial decisions.
Your points about it being genetic, this is true but sometimes it is not. If they have learned these bad financial habits and bad financial decision making from their parents and others in their family, it is a good chance that their parents and other relatives don't have much in savings accounts, RRSP's, TFSA's, non-registered investments etc.
They probably have a house, a couple of vehicles and bunch of other stuff but mostly no money and their racked with debts, auto loans, mortgage, line of credit, credit card debt etc.
Kanaka, servicing debt is one of the most 2 important factors why people can't save really any money and you guessed it, taxes is the other biggie.
Take care and good points made again.
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