Start saving while you’re young

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This article was published 25/02/2019 (2475 days ago), so information in it may no longer be current.

Investing can be intimidating and feel out of reach for many young people, but a Brandon financial consultant says it’s important to start building savings habits early in life.

“A lot of misconceptions a lot of young people have is ‘I want to start investing but I don’t have $5,000 or $10,000’ … It doesn’t take that to start off,” said Jonathan Hunt, a 22-year-old associate consultant at Dennis Hunt and Associates, IG Private Wealth Management.

One of the best ways to start is by putting away a small amount of money every month, even something as low as $50. That will add up over time, and it should be viewed as an investment, he said, rather than like putting money towards bills.

“A lot of people think they have to invest everything they make. I’m not saying don’t have fun,” Hunt said. “Spend what you have left instead of spending all the money you get, and then trying to invest the rest. Put yourself first.”

The other advantage of putting a small amount away every month is it can still be accessed in an emergency, but it prevents you from spending without thinking.

Dennis Hunt, Jonathan’s father and financial adviser, said the tax-free savings account is a good way for young people to start saving, as they don’t have to pay tax on the money in the account.

“The sooner you start, the more money you’re going to have down the road … The secret is getting a savings habit and staying disciplined with it over the longer term.”

The TFSA also doesn’t limit what the money is spent on, Jonathan Hunt said. The savings in the account can be used for whatever someone wants.

“I like the TFSA because you’re not restricted for anything; you can remove that money for a down payment for a car or whatever, there’s no restriction there.”

Saving and investing can be boring for many young people, Jonathan Hunt said, but the key is to look at what the result will be down the road.

“That new sports car you buy 20 years down the line, that’s not as boring.”

It’s important for young people to think about exactly why they’re saving, he said. For those saving up for a down payment on a first house or possibly going back to school, putting money in a registered retirement savings plan could be a good option.

“You can remove $20,000 tax free for schooling. Say you’ve accumulated some money in your RRSP and you want to use it for university or any kind of schooling, that’s another option.”

A person can take $10,000 out of the account per year, up to a maximum of $20,000. The money has to be repaid to the account within 10 years.

Savings takes time, Jonathan Hunt said, but once a young person gets started, compound interest can start to add up. It’s important to start putting money aside for bigger things early, such as a down payment on a house.

“I know it’s tough to save money — your friends want to go out and eat, and you end up spending more,” he said. “(Saving) is something that might be dull, but it’s something that’s super important … it’s not as boring when you have a lot of money at work.”

» dmay@brandonsun.com

» Twitter: @DrewMay_