Part 2.5: A Quick Tip on How to Save!

One question many people have is: How much should I save?

There is one general rule that should be followed when trying to save money. You should be saving 20% of your current income. This 20% can be put in RRSPs (where they are tax free!), GICs, Government Bonds, or even High Interest Savings Accounts. Saving 20% per year of your current income generally is enough to prepare you for the future. Lets look at an example.

Lets say you make $50 000 per year.

$50 000 * 0.20 = $10 000 that you should save each year.

That means you can take the other $40 000 and put it towards general living expenses, entertainment, and maybe even a trip to Mexico once in a while!

Now lets say you put that $10 000 per year away for 10 years at a rate of 5%..

-You are earning interest on interest! This is called compound interest.

In just 10 years of only saving one fifth of your income on a risk-free investment, you have earned $32 067.87 in interest AND have $132 067.87 to do whatever you want with! (Although I do recommend you save most of it, it's your decision!)

Once again, thank you for reading this mini blog. Next blog topic? Mortgages.