Now That You Are Saving Money…
Split your earnings into 3 (Save/Spend/Invest).
You’ve worked hard and now you have a wallet full of money. But now what? Should you keep it all in a bank account? Spend it on designer clothes? What options do you have? What I recommend you do is split your money 3 ways. This will guarantee you aren’t wasting all your money and will put you in a position to make gains for the future, as well as have a bit of fun right now.
One third of the money will be put into savings, one third will be invested and the last third will be your play money.
Now that you’ve saved and invested, you will have some left over money. You do not have to spend this money, in fact I recommend you put more into either your saving or investing account.
Saving:
The first one is pretty straight forward. Take one third of the money you have earned and simply save it for a big goal, such as university/college, a car or a vacation. If you automate this process, you’ll never miss that money.
I highly recommend you put it into a chequing account. If you keep it in a wallet or envelope inside your house, there is a high probability that something will happen to it or you’ll spend it.
Action:
- Have your bank set up a second savings account which automatically transfers a set dollar amount into it each month. This way, you are automatically saving money.
- Only have your original chequing account attached to your bank card so that it is not easy to access and spend the money in your savings account.
Investing:
As a relatively young person, now is a great time to explore the world of investing. You are laying the groundwork for your future self, since time is your friend in the investment world. Also, as a young person, you likely have less responsibilities, like a house or children, that would be at risk from your investment losses.
Action:
- Set up an investing account at your bank with your parent is you are under the age of 18
- Research what you want to invest in (Stocks, mutual funds, bonds, etc)
- Websites such as https://www.morningstar.ca/ca/ or https://www.moneysense.ca are great places to start
- If you know family friends who are experienced in investing, I recommend you speak with them and listen to their experiences, both good and bad.
- One book I recommend for investing is The Little Book That Still Beats The Market
Spending:
Now that you’ve saved and invested, you will have some left over money. You do not have to spend this money, in fact I recommend you put more into either your saving or investing account. However, it is always nice to have a bit of spending money when you want to hang out with some friends or go shopping.
Action:
- Withdraw a set amount of cash from the bank and only spend that cash. It is really easy to overspend using a bank card since they are digital numbers, you don’t feel the money leaving you