Canada Savings Bonds Are a Crappy Way to Save, But You Should Use Them

Breaking news alert!! Canada Savings Bonds are available again for payroll deduction purchases. Their sale is a fall-only option and available until November 1st.

They’re a really crappy rate and shouldn’t be used for investing but you don’t need to worry about your return until you get started in the first place. They’re great for getting started, for having them come off your cheque and for parking your money for a while.

If you work for an employer, go see your payroll department for five minutes today. Ask whether you can get them, or if your employer can do payroll deduction for RRSPs. If so, make it happen TODAY – if you don’t already. The only way most people save is by paying themselves first. If you wait until the end of the month to see if there’s any money left over, I can tell you right now: There won’t be. But you can’t spend what you don’t have, and that’s paying yourself first.

If that’s all new to you, it’s really easy to start. Just have 1% taken off your pay. You will never miss $20 or $30 a pay. It’s a tiny amount that won’t impact your life or your finances one bit. Then, every six months, increase it by another percent. You’ve lived just fine on a net cheque $20 less. Another $20 won’t make a difference…again,  you’ll never miss it. In another six months, add another one percent and so on until you are saving 10% of your pay.

It’s such a tiny change twice a year, you’d be amazed at how quickly your savings grow without any impact on your lifestyle or finances. Since it comes right off the top, there’s nothing for you to do. It’s on auto pilot and happening in good months or bad – in months where you’re behaving with your money, or spending it like you were a politician.

A few months ago, a relative received a letter from an ex employer he had been with for three years. They were asking where to send over $16,000 in RRSP money. When was the last time someone wanted to surprise you with an extra $16,000? You see, he had $70 or so deducted off every pay into RRSPs. After three years, with matching and growth, he had no idea what it all added up to and was sure surprised. It’s not like he missed the $70 a pay since he had it done on the first paycheque. But it sure added up…as can yours.

If you don’t have any savings options at work – shame on your employer – but you can also do it yourself. Go to your financial institution and ask to have a fixed amount transferred from your chequing to savings, a Tax Free Savings Account, or an RRSP every two weeks or every month.

Banks are for parking money. They are not places where you should be doing your investing. But it’s a start in order to get some traction. And the hardest thing with many financial lessons is to get started. It’s the first step that’s the most challenging. After that – you’ll never do without it again, as it’ll be part of your routine.

I had another minor savings plan a few years ago. I decided to live without coins. Every time I got any change, it went into a bucket. So, essentially I used $5 bills a lot because coins were always re-directed into this bucket from nickels to toonies. In one year, that ended up being over $1,000! Other than the pain of rolling them, it was a totally painless savings plan.

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