Spending is fun. Exciting. Easy. New clothes, eating out, travel, parties, special coffees—who doesn’t want to enjoy all these wonderful things and experiences?

Saving money can seem hard. Boring. Difficult. It might mean making your own lunches, wearing clothes that have gone out of style, travelling local, and skipping some experiences.

So, what will you do? Will you say, “I can start saving in the future”? Or will you sit down and already start thinking about saving for retirement?

It doesn’t matter whether you are a student, a young professional, or a business executive. What matters is creating habits in your life from a young age.

As a student, you might say, “I don’t make much, and it’s not going to add up to anything significant.” But it doesn’t matter whether you have a lot to save or how much it adds up to. What matters is developing the habit of saving that will see you accumulate a great amount over your lifetime, paving the way to an enjoyable and affordable retirement.

One of the key principles of financial success is saving and investing at least 10 per cent of every dollar you earn. I’m a big proponent of never touching these funds until retirement, but they could also be accessed as an emergency fund or an opportunity fund.

When you start working in a full-time, permanent position, you could even consider increasing that 10 per cent to 20 per cent. If you do this at the start of your career, it’s like you never had that money, and you might be less likely to miss it. The mistake some people make is that as their income increases, their spending increases instead of their saving. This can be wasteful and assumes your situation will always get better, but reality tells us sometimes people lose their jobs or they get sick or become disabled.

An important question, though, is: What vehicle to use for savings? The two most popular choices are Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs). With either plan, you can invest in investment funds, stocks, or even plain-vanilla term deposits. An RRSP provides a tax deduction based on your tax bracket, and the funds grow tax-free but are taxable upon withdrawal. A TFSA does not provide a tax deduction but grows tax-free and is tax-free upon withdrawal.

But which is right for you?

A rule of thumb is the higher your income, the more an RRSP makes sense; the lower your income, the more you might choose a TFSA. A financial planner can help you determine which option makes the most sense based on your circumstances. Which leads to the last point: you need allies—someone on your side, someone who can coach you through the financial issues you will be facing, someone who can also be your advocate in navigating the financial challenges you will face. This can include a qualified financial planner or simply identifying people who have achieved saving success in their own lives and would be willing to mentor you.

About the Author

John Kok CFP, RRC, CEA, CKA is the Founder and President of Navigator Financial. He is passionate about the importance of financial education as an effective way to improve the lives of Canadians. He can be reached at 780-425-5870 or john@navigatorfinancial.com.