Do you have saving questions?
Where are your savings?
I guess a better question is “Do you have any savings?“, before asking “Where are you putting your savings?“, but which is the better question to answer?
Do you put most of your savings in RRSPs or do you have it easily at hand in a trading account? Are you really traditional and have your money in a nice save “Savings Account” (which pay effectively no interest)?
Is Should you have savings, an even more interesting question? If you are carrying heavy consumer debt (i.e. pay day loans, credit card loans and the like), should you have money in savings, or should you be paying off that debt? Is it smart to have a “rainy day” fund if you are already in a financial hurricane of debt?
If you find money (i.e. windfall profits, inheritance, or won a beauty pageant) is it better to save it, or should you use it to pay down your debt? Is this really found money, or should you really just view it as an extension of your normal income and treat it that way? Can you show me where you found this money, so I can maybe find some too?
What if you are really lucky and have no debt to deal with, is that the time to start worrying about saving money, or should you have started sooner? Should you put your savings in RRSPs or is it smarter to put the money in a traditional trading account and build up wealth that way?
Does anybody still buy CSBs? Why? Are bonds as safe as you think they are?
Why did I write an entire post of questions today? Am I hoping you might comment on these questions? Isn’t it interesting, that someone who always asks questions is called an expert, yet they never seem to have answers?
Did you notice I never really answer any questions?
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January 6th, 2010 at 9:11 AM
My work offers a payroll deduction CSB purchase plan every year. I actually complained about it last year to our HR department to which they responded they want to be able to offer people these options and are not there for financial advice. I try to talk people out of them every year.
I only have my work RRSP, a tiny (near non-existent) emergency fund, and a gadget savings account.I use ING for any money that’s not used up in day to day operations.
My debt is student loans, a car loan, and a mortgage. Any windfall money should really go to the car loan, but I doubt that would happen in reality. More likely it would replace my aged computer or semi-functional camera. Also, now that I own a house there are piles of little projects and things that need to be taken care of so that pretty much eats up any extra cash anyway.
I seriously need to make beefing up the emergency fund a top priority this year. Too many things in life come at you unexpectedly to try to manage them all while trying to figure out where your power bill money is coming from.
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January 6th, 2010 at 10:28 AM
Our Current savings are as follows:
Company pension plan $22,814.29
CSB $500.15
LSVF $11,687.52
Annuity $3,596.62
Cash-EF $10,000
RRSP $27177.90
I have just finalized my 2010 budget and here’s what the numbers show in the savings catagory for this year:
Type Anuual
RRSP $6000 (monthly payments of $500)
TFSA $5000 (monthly payments of $416)
CSB $3000 (payroll deduction of $125 every 2 weeks)
LSVF $5000 (payroll deduction of $192 every 2 weeks)
And now the debt
Item left owing monthly pmt
Quad $1739.42 123.71
Tractor $6874.44 572.87
Truck $11987.29 500.00
We don’t carry a huge debt load, but our goal is to be debt free by December 2010 (not including mortgage) We currently have $10,000 cash for an emergency fund. Depending on my Income Tax return, I will probably use some of the emergency fund to pay off the remaining debt, so we can reach our goal of being Debt Free !!!
You asked the question of CSB’s….the only reason I buy them is because it is an EASY save, they are taken right of my paycheque, before I ever see it…or spend it !! I cashed in $10,000 of my CSB this year, as they are only paying something like 0.4% interest, so i will use some of that money to pay down debt.
That’s about sums up my debt and savings, interested to see others too ! For reference sakes, we are 40 years old, with a combined income of $100,000. We have just recently (within the last 2-3 years started getting serious about debt payment and saving) We have a longggggg way to go, but glad we are on our way !!
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January 6th, 2010 at 1:26 PM
Melany, that seems to be the general consensus of why people use CSBs where I work too. Is it really that hard to open an ING/PC/Ally savings account and set up an automatic withdrawal that matches your paycheck/income? Is it worth triple your return?
0.4% is well under inflation, your losing money by keeping cash in CSBs. At least with most high yield savings accounts your staying near the inflation rate making your money value near what you put in there.
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January 6th, 2010 at 2:34 PM
My wife is currently considering going back to school (law school, where the tuitions are insane), so we are trying to build up sizable, non-volatile and liquid savings. I have not, however, reallocated money from existing savings. Currently our picture looks like this:
- ING Savings Accounts – $3600 (for school, or to fund a house upgrade if she doesn’t go that way)
- Questrade TFSA – $9000 (moved some stocks in back in April…only used $2300 of contribution room).
- Work RRSP – $2500 (matching is currently suspended due to the recession, but I expect it to restart in the next 3-4 months, and I don’t want to feel like I’m taking a hit to continue savings, so my contribution is still going in)
- Personal RRSPs – $5000
Debt:
- Student loans – $22,000
- Mortgage – $250,0000
No consumer debt, so our highest interest rate is actually the fixed rate mortgage at 5.74%. I do have available a $5k line of credit available, but have no intention of tapping it.
My thoughts on your other questions
- If you have high-interest consumer debt, you should pay it off before building a rainy day fund. Credit cards cost a fortune and if a rainy day arrives, you can simply borrow on them again (if absolutely necessary). In the mean time, you’ll save hundreds, if not thousands, in financing charges.
- I’m 27 and have never in my life considered CSBs as an option. Loaning money to the government at a fraction of a market interest rate does not seem like a good financial strategy.
- I do have the occasional found money moment. Tax refunds are the consistent one, and my grandparents (who are well off financially, but in poor health and can’t find ways to spend all they’ve got) have given me a few 4-figure cheques over the years.
When I was younger, I usually used “found” money to pay for a large ticket item that I wanted. A trip to Europe, a high-end camera, a new bike. As I’ve gotten older (and perhaps because my income has increased), I prefer to save my earned income towards these things, as well as my ongoing savings plan, and then use “found” money to boost my savings.
I sometimes think about using some of my savings to pay down debt. But the returns aren’t that big because my debt is all pretty low interest. Even if we weren’t considering law school, this cost of liquidity is pretty low.
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January 6th, 2010 at 3:42 PM
As a young woman, I was a saver. Then I married a spender, who also liked to spend my money. My fault, I let him. That was a hard lesson learned. It took me 5 years to crawl out from under that debt. As a result, family finances are now handled very differently.
Although we share responsibility for common expenses, such as the houses, proportionately based on income, the remainder of our income is kept separate. She knows her car loan will be her responsibility until it is paid off, although my pension and our combined RRSP’s will support us in our retirement.
I know my spouse has RRSP’s, but no pension plan. She also has a car loan that is charging 8+% She had no choice: she needs the vehicle for work and hers just up and died one day, just months before the economy took a dive. She would very much like to pay down the car loan, but retirement savings are her priority #1. She has access to a 10K line of credit, at 3%, in case we run into any major issues, such as the country garage needing a new roof this spring. Paying that off has been a priority for both of us, and is almost done.
I have a very good defined-benefit pension plan. I also have RRSPs but most of those will eventually go to buy back pension service time for a planned sabbatical. My vehicle loan is at 1.8% so paying that down is not a priority for me. I have just over $500 of ‘discretionary’ savings in a TSFA. Were it not for ING, I likely would have half the RRSP’s I currently have.
For me, it has been a great vehicle for saving. As my RRSP balance would hit $1,000, I would pick the RSP GIC that looked best to me and stash it away. Lately, because of the bonus 3% rate on the TSFA, RRSP contributions have been going there to wait, rather than the daily interest RSP acct earning 1.5% The ‘coup’ of which I am most proud is having put a slice of RSP money into a mutual fund at the bottom of the market. It’s had nowhere to go but up. After a year, I’ll be able to compare it to my less risky choices.
We have some joint BigOrange ‘interest-free for x months’ debt (total of under $1000) via which we have renovated the house, and now our cottage/future retirement home. We have been doing this for 9+ years and have never paid a penny of interest.
Our interest-charging credit cards are paid off every month, and are used primarily for gas and some monthly billings that prefer that approach. I also have about $2000 in interest-free debt for electronics ‘toys’ – we all have our vices, right?
The equity in our city home paid for the country home and since our market hasn’t been hit by the economic downturn, we will still end up with reasonable cash-in-hand when we sell.
I use non-regular income (ie, reimbursement of expenses by my employer or my spouse, tax refunds, etc.) to cover my share of the annual expenses like property and school taxes.
We’re covered in an emergency, but I would feel happier having more in discretionary savings. But then, I would want to sock it away into something earning better interest. I find saving becomes addictive.
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January 6th, 2010 at 4:31 PM
I keep enough in my checking account to pay no fees (3000) and I consider that part of my EF. Plus an extra 2000 at ING in a savings account. I have a govt job, so I’m comfortable with that amount for EF. I max my RRSP, but that’s not a huge amount b/c of my pension plan (and I had emptied some of it many years back to go back to school… bye bye contribution room). Now I’m also maxing my TFSA. And 10% of my net income in TD e-funds on each payday. When I get extras, sometimes I make an extra payment on my car (my only debt), sometimes it goes in the “travel fund”, or sometimes I invest it.
I don’t use CSBs, not worth it. I’m disciplined enough as it is.
I’m 40. I started late (and with a lot of debt), but I’m doing ok now, I think.
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January 6th, 2010 at 6:42 PM
Traciatim…. my question is “Why would you try to talk your co-workers out of saving with a CSB?” The main point here is that they are SAVING and not spending, and if that is the only way they can save, then I say do it! There are toooooo many people in this generation with absolutely NO savings, or investments. Anything to encourage people to save instead of going further into debt should be applauded. Yes, I agree, it’s not for everyone,but knowledge is power, and when people KNOW better, they DO better. So instead of trying to talk them out of it, educate them on what to do with that money instead. As I am learning about personal finance, I am constantly wanting to learn something new. I realize the current returns are pathetic, that is the reason I cashed them in. There were getting a better rate last year, and I didn’t want to invest that money as it was my EF and I needed it “ready if needed”. But even now that I know better, I don’t think that will stop me from continuing with CSB payroll deduction. However, I will use this money as planned spending (vacations, repairs etc) instead of long term savings/investing.
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January 6th, 2010 at 8:07 PM
Well, to start with, I’ve been married for 32 years, 53 years old and have owned a few businesses in the past after being caught in the downsizing funnel.
I started in RRSP saving around 1995, since we had no extra money prior to that as everything went into keeping the business afloat. I now have a government job for which I am very grateful.
Our house has been paid off shortly after getting out of business. Thats where the profit went. I started learning about mutual funds back then and have been able to put away and build the RRSP to $95,000. We have TFSA totaling $10,000 and a cash account (also invested in mutual funds) of $45,000.
That $45gs came from selling a 4 plex apartment building we bought after paying off the house. We used the equity of the house (only $35g) for the downpayment and borrowed the remainder to purchase the 4-plex. All the rent went back into the building, and we sold it 3 years later for a $100,000 profit (of which taxes have to be paid)!!!
I just wanted to say….to those that think we started with a golden spoon….not so. My wife has worked part time and I have never made more than $50,000 per year. We have two kids in college, and also managed to give them $20gs each for school from the 4-plex profit. We dont owe a dime, and I hope my RRSP’s continue increasing although they are in safer funds now than 10 years ago.
Best of luck to all. Thanks.
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January 6th, 2010 at 10:18 PM
RE: CSBs
Another reason not to discourage coworkers from buying CSBs is because they are effectively saving you money. Not much, but it all adds up. By allowing the government to borrow their money at bargain basement prices, they allow the government to lower taxes and/or increase services over what could be provided if they had to pay bond market prices for the same money. What a deal.
However, I’m not sure that Melany’s argument (at least they’re saving something) is accurate. Many of the people who sign up for low-yield but automatic programs like that are effectively buying 0.4% CSBs with 20% credit card debt. Because lots of people like the security of knowing you have some money available, they’ll take the payroll deduction, but not curtail their spending by so much as a nickel.
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January 6th, 2010 at 11:11 PM
The best way to develop savings is to avoid debt… then you can pay yourself!
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January 8th, 2010 at 1:44 AM
[...] Thoughts: So Many Questions I was astonished at the response I had from my posting Do you have saving questions? and I thank all of those who posted about their financial situations. I will not comment on them [...]
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January 12th, 2010 at 12:44 AM
[...] Cajun Man presents Do you have saving questions? posted at Canadian Personal Finance Blog, saying, “How do you save? So many [...]
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January 22nd, 2010 at 1:35 AM
[...] can find my post Do you have saving questions? at the Carnival of the Road to Financial [...]
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