Given how sharply property prices have risen in recent years, it’s more important than ever to start saving early if you want to become a homeowner.
If you follow these tips, you will definitely reach your goal!
Save a Portion of Each Paycheque
According to Cynthia Laventure, financial security advisor and owner of the firm Mon choix financier, you should automatically transfer a certain percentage of your wages to a savings account every time you get paid. In other words: always pay yourself first!
The best method for growing your assets remains regular investment or savings deposits. You’re sure to end up with a substantial sum after a few years thanks to a combination of earnings from accumulated interest and systematic capital investment in the markets. The more you save, the more your money grows over the years.
Use the Most Appropriate Investment Vehicle for Your Situation
But where to place your savings? It depends! Each person’s circumstances are unique.
As a general rule, young adults entering the workforce usually find themselves at the lower end of the pay scale and thus pay very little income tax. Consequently, contributing to RRSPs isn’t necessarily the best choice.
Instead, you want to prioritize your RRSP in the years when you earn your highest annual income and are subject to the highest possible tax rate to maximize tax savings. Above all, contribute to your RRSP when your income is higher than it will be in retirement in order to truly optimize the strategy behind RRSPs.
Financial security advisor and owner of Groupe Financier Symbiose
The FHSA works similarly to an RRSP in that it also generates tax savings. Accordingly, you should contribute strategically to your FHSA to maximize deductions during the years you are subject to your highest marginal tax rate, while ensuring no contribution years are lost (since you can’t recover several years’ worth of unused contribution room).
The TFSA represents a more flexible option that allows you to invest and build capital tax-free while you take time to see how your financial situation evolves so you can choose which investment vehicle (RRSP or FHSA) most fits your needs.
To learn more about the different savings plans, consult our article TFSA, HBP, RRSP: Which One to Choose?
Delay Moving Out
It isn’t uncommon for young adults, and even teenagers, to be eager to leave the family home and strike out on their own. However, they may not realize that by staying with their parents, when circumstances allow, actually enables them to save significant amounts of money for a more secure financial future.
These savings will become an incredible lever for all kinds of projects, especially the purchase of a first property. Some parents even ask their working-age children to pay a small rent as a way of saving for a downpayment. Not a bad idea!
Work With a Personal Finance Advisor
Another step that can help young workers realize their homeownership dream is consulting a personal finance advisor. This professional can direct them towards investment vehicles suited to their budget and guide them through key decisions along the way.
We hope our advice truly helps you achieve your goals!
