You work hard to provide for your family and so you can achieve those financial goals you’ve set for your future. Like retiring comfortably someday, and helping send your future scientist to the college or university of their dreams.

When payday rolls around, you have every intention to stash some money away in your savings accounts and investments. But first you’ve got living expenses to pay for—mortgage payments, car insurance, childcare costs and of course, that giant grocery bill from feeding hungry, growing kids. Then, there’s also life’s little luxuries, like your monthly streaming subscription and occasional Starbucks fix. They all add up, and before you know it, there’s not much left in your chequing account to direct towards your savings goals.

If it feels like you can’t seem to find extra cash to save—or even if you’re just wondering how much of your paycheque you should be saving—you’re not alone. Thankfully, there’s a simple way to break down your paycheque so you can save more of what you earn.

Enter the 50-30-20 rule

You might be wondering, “What’s the 50-30-20 rule and how does it help me save money?” Based on this personal finance guideline, you can divide your (after tax) monthly income into three categories, saving at least 20% of your paycheque (but more is terrific, too). It’s a simplified approach to budgeting (no complicated spreadsheets required!) that was made popular by Senator Elizabeth Warren in her book All Your Worth: The Ultimate Lifetime Money Plan. The best part is you don’t have to follow it to the last letter in the book! You can customize saving based on your family’s goals.

The 50-30-20 rule goes like this:

How it works

Let’s say, every month, your income after taxes is $3,000. That means you would have $1,500 to cover your needs, $900 for your wants and a monthly savings of $600. Nice, right?

The great thing about using this framework for budgeting is that you can make adjustments to it so that it works for your own financial situation. More than one person earning an income at home? Combine your after-tax income together to create a budget for your household.

Now, here’s a closer look at the breakdown:

50%: Pay for your necessities

These are the can’t-live-without things, like food and shelter (i.e. rent or your mortgage payments) as well as utilities, car payments, insurance and your cell phone bill. Any payments for loans or credit card debt fall into this category, too.

If you’re finding that your expenses are over 50% of your after-tax monthly income, you’ll need to take a look at where you can cut back. Perhaps it’s time you finally look into a cheaper phone plan? Or switch to a credit card with a lower interest rate?

30%: Spend on your wants

Before you get too excited and go on a shopping spree with 30% of your paycheque, remember this: your wants also include upgrades to your lifestyle and everyday expenses, like your daily coffee run. If it’s not essential, it falls under this category. Those new shoes, your upgraded cable package and ordering delivery for family pizza nights are all wants.

It’s important to use some discretion when it comes to distinguishing between your necessities and wants. For example, if junior has outgrown last year’s winter jacket, you’ll need to replace it with a new one (that’s the category above!) But, if you decide to purchase a fancy, brand name jacket, then that actually falls into wants. When possible, try reducing your spending in this category, and you’ll find it no problem to increase your savings. 

20%: Allocate to your emergency fund, retirement savings and children’s post-secondary education!

Finally, you have 20% of your net monthly income that can go towards your savings and investment accounts. Think of this category as an investment in you and your family’s future!

Your short-term goals can include building up your emergency savings and making sure you have three to six months’ worth of necessary expenses covered in case anything unexpected happens. Your long-term savings can include contributions to your retirement account and of course, a Registered Education Savings Plan (RESP). Each month that you can afford to save money in your RESP means a brighter future for your scholar-to-be so they’ll be less reliant on hefty student loans to pay for their post-secondary education.

Want to make saving a piece of cake? Here’s a tip: Make your contributions automatic. Setting up auto-contributions from your bank account to your RESP every month is a great tool for dividing up your paycheque because you save the money before you’re even tempted to spend it.

The bottom line

The 50-30-20 rule is an easy way to break down your paycheque and make sure you have a savings plan in place. But if saving 20% of your monthly paycheque isn’t realistic for you right now, don’t sweat.

With a CST Spark RESP, you can start investing with as little as $10 a month! We offer flexible contributions, so you get to decide how much and how often you contribute. Even small amounts add up fast, and you’ll see that your contributions get a boost from government-matching grants and investment earnings.

Now that you know how to break down your paycheque and have figured out how much you can save for your child’s future, the next step’s even easier. As a digital-first company, we make it a breeze to set up your RESP online. It only takes a few minutes! We’re here to make saving for your child’s education simple, so if you have any questions along the way, just give us a call or chat with us online.

CST Spark Education Portfolios is sold only by Prospectus. Copies may be obtained from or by calling 1 (800) 461 7100. 

C.S.T. Spark Inc. is the distributor and manager of the CST Spark Education Portfolios.

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