Investing is how you make money for your future—the big things, such as your child’s education, your dream home, or your retirement. But when you’re juggling car payments, childcare costs, and a new wardrobe for your growing child each year, it can be hard to find the money to invest, but it doesn’t have to be.
Life can be chaotic and we get it. But here’s the good news: you don’t need a ton of money to get your investment off the ground. The key is to start early. That’s because of compounding, or as many experts like to call it, one of the miracles of investing. The idea is that once your investment starts to grow, reinvesting your earnings can also generate earnings over time. And the longer you’re invested, the effects of compounding become more obvious.
So how do you put money aside when money is tight? It’s not as difficult as you think. Here are our five tips for investing on a budget.
1. Set up automatic withdrawals so the investing happens, well, automatically!
If we see money in our bank accounts, we have no problem finding a way to spend it (hello new pair of shoes that I didn’t know I needed!). But when we see that monthly funds are dwindling, we stop those impulse buys.
That’s why we suggest you set up automated monthly withdrawals for your Registered Education Savings Plan (RESP). You’ll find that you naturally adjust your spending. The best part is that you won’t miss having that extra spending money, because you’ll focus on what you really need.
2. Choose an investment company with competitive fees—and that understands your goals.
If you’ve found competitive fee investment, that’s a great start. After all, you don’t want to be paying out a good chunk of your investment income in fees. But, be careful that you don’t go with such a “no frills” investment approach and end up with a portfolio that doesn’t align with your goals—or doesn’t make sure your money is there when you need it.
At CST Spark, we’re able to keep our management fees low because we’re a digital-first RESP company, and because we invest in low-fee exchange-traded funds. But unlike other RESP companies, we automatically age-rebalance our customers’ investments based on the age of their child. We aim for growth in the early years. Then, in the years leading up to graduation, we move to more conservative investments that are less vulnerable to a market downturn. In short, we invest with one important goal in mind: that the money is there when your child needs it to pay for post-secondary school.
3. Don’t wait until you’re debt-free to invest.
Many people have the mindset that they can’t put money aside to save until they’ve paid off all their loans or mortgage. But, it’s often a good idea to invest at the same time as you pay off debt. That’s because your investments have the potential to grow bigger the longer you keep your money invested. And if you wait until you’ve paid off your mortgage or car, you’ve shortened the amount of time that they could have grown.
4. Invest in an RESP and get a 20% boost. Yippee!
This is our favourite fact! When you put money in an RESP, your money could skyrocket, paving the way for your child’s dream of becoming a, well, whatever they want to become! That’s because in addition to any earnings from your investment, you can get government-matching grants of 20% of your contributions capped at $500 a year and a lifetime maximum of $7,200 per child from the Canada Education Savings Grant. And all growth is tax-sheltered while in the plan. Plus, if you fall under the household income threshold, the Canada Learning Bond could land you an extra $500 government grant just for opening an RESP, plus $100 each year you qualify up until your child is 15 for a maximum of $2,000.
Pssst… this is another reason why it’s important to start contributing to your RESP early: the government tops up your investment each year with CESG until the earlier of the lifetime maximum is reached or your child turns 17. So if you don’t start early enough, you could miss out on government grant money!
5. You can start small. You don’t have to have boatloads of “extra” money to invest.
Have you checked out the CST Spark RESP yet? It gives you the flexibility to decide how much and how often you contribute. In fact, you can start investing with as little as $10 a month! That’s an easy way to get that education nest egg started for your little scientist, lawyer or electrician in the making! With our planner, you’ll love seeing how quickly your contributions could grow, thanks to government grants and investment earnings.
Plus, because we’re a digital company, we’ve made it our mission to make it super easy to open an RESP from home in just a few minutes. And if you have any questions along the way, we’re just a phone call or live chat away with answers. After all, we know raising your little scholar-to-be can be chaotic, so we’re here to make savings for their education simple.
What are you waiting for? Start an RESP today with CST Spark and help make your child’s dreams a reality!
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