Savings is a very important part of a budget. Not only can it help you to avoid insolvency but it can also be a very important stepping stone into repairing your credit or building your credit.
How much can you afford to save?
The ideal amount to save would be 10% of your take home income. So if you make $2000 per month you should be saving $200. Sometimes this can seem like an impossible goal, especially if you are on a fixed or limited income. After you have budgeted you basic living “needs” you should consider savings before “wants”. Even if you only have an additional $20, that can go a long way to starting the road to savings. You can gradually build up your savings over a period of time. In the first month of the year save 1% of your income, in the second save 2% and so on.
What should you save it for?
To start it’s always important to focus on an emergency fund. An emergency fund is established to cover any unforeseen or unexpected events like a layoff or a funeral oversees. Emergency funds should be liquid or easily accessible.
Where should you save it?
Ideally a Tax Free Savings Account (TFSA) would be a great place to start a savings plan. They can be opened at any financial institution and you can set up for automated contributions on deposit payments. You can invest while you’re in the TFSA or you can keep it cash or liquid. You can contribute up to $5000 per year. The Key benefit is that you do not have to pay taxes on earnings within the account or on withdrawals.
How to find savings in a tight budget?
Sometimes of a tight budget it may be hard to set aside a specific amount to save. One way to find extra money to save is to find it within your current budget. If you have allowed $100 this week on groceries and you only spend $90 because of the coupons you’ve clipped, you have found $10 to save. Throw it in your savings account and forget about it. You can also consider saving you change. Simply putting aside all of the change from you cash spending can add up in the long run.