Two weeks ago, the National Post/BMO survey came out showing where we put our money once we’ve invested in an RRSP or a Tax Free Savings Account, and 57% of all the money is in cash and 23% is in GICs. Ok, that won’t work as you’ll get no return at all, and you need this money to grow for your retirement.

Not all savings are the same. The first thing you have to know is that there are different savings or investments:

Your one-week emergency savings and (once you’re debt free), your three months of expenses emergency account money needs to stay in a simple savings account because you may need to get to it. So, this money isn’t invested.

Saving for something bigger: If you’re saving for a newer vehicle, your annual bills, or, in my case, replacing my roof, that’s still money you’ll need in less than five years. Unfortunately, it needs to stay in a savings account because you need to protect the principal since the money is for a specific purchase or expense.

Retirement savings: This is money you won’t need or touch for a very long time and needs to be invested in order to grow. Anything longer than five years is investing – anything less is savings. You’ll need the five years window in order to ride out any up and down cycles in your investments. Less than five years makes that too risky and too short.

So, if investing is five years or longer, you can’t have this average of 80% of your money sitting in cash or GICs – it won’t grow enough to help you in retirement. There’s something called the rule of 72. Take your interest rate and divide it by 72. That’ll give you how long it takes to double your money. A 1% return takes 72 years to double your investments. A conservative 7% return doubles it every 10 years, and doubles again in 10 more years.

You do need to invest the money, but you need to not hyperventilate or panic when the market moves on one day or another. Who care what the stock market does on a given day when you don’t need the money for decades? Monday, because of the Ukraine, the Dow dropped 150 points. But on Tuesday it was up 220 points. Who cares! You’re invested for the long term and not for two days! A simple S&P 500 index funds has next to no commissions and gives you a basket of all the 500 largest companies in the world. A 10-year old can buy that in five minutes, and it’s returned 25% over the last year, 15% over the last three years, and is still over 7% in the last decade!

If you’re wishing to buy mutual funds, start at Morningstar.ca. It’s a rating company that’ll let you find good growth mutual funds with a long term track record and low expense ratios.

And whatever you do, go to yourmoneybook.com and look back on a story on dollar cost averaging. Do not dump your money in all at once. You want to contribute monthly into whatever investments you choose. It’ll put you light years ahead of anyone contributing only once a year.

Lastly, banks are for parking your savings and not for investing! I manage the money for a relative that had nothing but GICs with a bank – to the tune of high six figures! The return over the last decade was 1.4%! I moved it to a conservative managed portfolio that’s averaged 7.7% over the past two years. The different in the return has been over $105,000. That’s free money and still conservative.

Remember the difference between savings and investing. And keep asking yourself what you want to say to yourself when you retire: Wish I had…or glad I did?