Tips to Help You Save for a Big Event or Expense
When you’re saving up for an important purchase or milestone, it can be easy to get overwhelmed by “the number” you need to save. Here are our top tips for setting a realistic goal—and making the most of every dollar.
Know how much you can (realistically) save.
Chances are you know how much you need to save, but if you’re not sure how to get from 1% of your savings goal to 100%, here are a couple things you can do:
- Figure out how much you can afford to set aside each week or month. Take an honest look at your spending—is there an expense you should cut out—or do you have a surplus you can put towards this goal instead?
- Of the total amount needed, how much do you want to save? If it’s not possible to save the entire amount, set a reasonable goal and consider a personal loan or line of credit for the rest so you can pay it off over time.
Choose the right account for your savings.
|High Interest Savings Account||
Put your plan into motion.
Want to save as fast as possible? Put your savings on auto-pilot and grow your money faster by setting up regular (weekly, monthly, etc.), automatic contributions into your TFSA or high interest savings account.
TIP: Start with what you have. Anytime you have extra cash (a tax refund, for example) you can make a larger contribution.
- You decide how much to save and how often—weekly, bi-weekly, monthly—it’s up to you
- Contributions are automatically debited from your bank account (at RBC or another financial institution)
- You can change how much you want to save, how often you contribute, and stop or pause your contributions at any time
Tip: Set your automatic contributions to coincide with every paycheque.
Get Advice—and stay on track—with free tools.
If you’re an RBC client, you’ve also got access to free tools that can get you started with saving for your goal and help you stay on track:
- A quick way to start saving for your big goal is with the help of NOMI Find & Save.It’s a digital savings account that learns your transaction patterns, finds extra dollars in your cash flow and automatically moves them to savings. Turn on NOMI Find & Save in the RBC Mobile app.
- MyAdvisor is a digital service that can help make saving for an important milestone easier.
MyAdvisor is a digital service that combines interactive planning tools and advice from a live advisor to help you stay on top of your savings goals. It’s exclusive to RBC clients, easy to use and available to you at no extra cost.
- See what you have with more certainty. MyAdvisor shows you how you’re doing with powerful visuals and forecasts of your goals, net worth and cash flow.
- Link outside accounts for a complete picture. Have savings and investments outside of RBC? MyAdvisor lets you quickly link them for an up-to-date look at your money.
- Receive personalized advice. Meet with a live advisor through video chat, by phone or in person to review your savings plan, talk strategy or to simply ask a question.
- Stay on track toward your goal with email alerts. Progress alerts let you know whether you need to adjust the amount you are saving in order to reach your goal.
- Get started in a few simple, hassle-free steps. In minutes, you’ll have an idea of where you stand, see recommendations to help you grow your savings, and be able to book a one-on-one with an advisor.
FAQs on Saving and Investing
Unlike simple interest, which means you earn interest on your initial savings only, compound interest means you earn "interest on interest". The interest you earn on your initial savings is reinvested, so you earn interest on the new total—the original amount plus the interest.
Here's an example of compounding on $10,000 earning a guaranteed 2.5% interest rate (assumes annual compounding and no additional contributions):
|Year||Value on January 1||Interest earned (2.5%)||Value on December 31|
As the example shows, the longer you can keep your money invested, the more significant the impact compounding interest can have.
Mutual funds, individual stocks and exchange-traded funds (ETFs) can also pay income in the form of dividends and distributions, and compounding can come into play if you reinvest those earnings.
The limit for 2023 is $6,500. However, if you haven’t maxed out your Tax-Free Savings Account (TFSA) contribution limit (see chart below) in any prior years you were eligible for the TFSA, you may be able to contribute more.
Here are the contribution limits for each year the TFSA has been around:
|Year||Contribution Limit Per Year|
|2019 - 2022||$6,000|
|2016 - 2018||$5,500|
|2013 - 2014||$5,500|
|2009 - 2012||$5,000|
Unused contribution room can be “carried forward” indefinitely and there is no limit on how much contribution room you can accumulate.
The Canada Revenue Agency (CRA) tracks your contribution room and reports this amount through the “My Account” function on the CRA web site.
Knowing exactly how much money you have going out (your spending) vs. coming in (your income) is a great way to identify opportunities to save more and spend less. There may be a monthly subscription for an app or a magazine that you don’t really use. Or, maybe you really do have an extra $50 you could afford to sock away each month.
If spreadsheets and math aren’t really your thing, there are tools that can help make budgeting simple.
For example, if you’re an RBC client, you can use NOMI Budgets on the RBC Mobile app at no additional cost. NOMI Budgets takes the math out of managing your money by doing the thinking for you. It recommends personalized budgets for you based on your spending and helps you stay on track by sending you updates along the way.
Learn more about NOMI and NOMI Budgets or or check the RBC Mobile app to get started.
You can open as many TFSAs as you like at RBC and other financial institutions. Your available contribution room, however, will be the same whether you have just one TFSA or several, so you will need to keep an eye on your contribution room for all your accounts.
One reason you might want to have more than one TFSA is if you would like to invest differently with some of your money. For example, you might want an advisor’s help picking TFSA investments for a very important savings goal you have, while using a self-directed TFSA to try your hand at DIY investing. Explore all the ways to invest at RBC!