Saving means putting money aside for the future. But it’s just as important to know what you are saving for. This is where financial goals come in. Having clear goals can help you stay on track and give you a purpose for saving.
Why Should You Save Money?
Picture an empty jar. Every week, you drop in your spare change. You label the jar “dining out fund.” Over time, those coins grow into enough for a nice meal out. That’s what saving is—setting money aside with a purpose. The amount you save depends on what you are saving for and when you will need the money. Here are some common reasons people save:
Unexpected bills and emergencies – Having an emergency fund helps you handle surprises without borrowing money or stressing out. With this fund, you may be able to pay for urgent home repairs or cover a few months of living costs if you lose your job. Even a small financial cushion is better than having none at all.
Short-term goals – These are goals you hope to reach within the next three years. They could include planning a wedding, fixing up your kitchen, or going on a dream vacation. These goals often take more than a few months to save for. The more you can save in advance, the easier it is to pay for them without needing a credit card or loan.
Long-term goals – Retirement is one of the biggest long-term goals. If you haven’t started planning for it, now is a good time. The earlier you begin, the more time your savings will have to grow, helping you enjoy retirement without money worries.
Helping family and loved ones – Saving money can give you the ability to help those close to you. You may want to support a loved one who is starting a business, help aging parents, or assist a friend through a tough time.
Having more personal choices – With savings, you have more freedom. You may want to start your own business, return to school, or move to a new place. Having money saved gives you more options.
How Can You Set Your Financial Goals?
When you know what you’re saving for, it’s easier to stick with it. But knowing where to begin can be hard. These tips can help you set and organize your goals:
1. Write down your goals and pick your top three
Start by writing down all the things you want to save for. Think about why each one is important to you. You might find you have more goals than you can save for all at once. That’s okay. Start by focusing on your top three goals.
2. Be clear and specific
The more details you add, the easier it is to focus your savings. For example, instead of just writing “vacation,” write down where you want to go, how long you’ll stay, how much it will cost, and whether you’ll travel alone or with someone else. These details help you come up with a real savings amount and keep you focused on your goal.
3. Rank your goals by importance
Sometimes goals may overlap or compete. For example, you may need to decide between saving for your retirement or your child’s education. Ask yourself which goal would be harder to deal with if you didn’t reach it. You can also split your savings and contribute to both goals, even if it’s a smaller amount for each. Keep in mind that your priorities can change over time. You can adjust your goals later if needed.
4. Review your goals at least once a year
Life changes. You might get a new job, get married, or move. These changes can affect how much you can save. Check in on your goals every year or when a major change happens, and adjust your plans as needed.
How Can You Make Saving a Habit?
Knowing what you’re saving for gives your savings a purpose. Once you have a clear goal, it’s easier to stick to the habit of saving. You’ll also be more careful with your extra spending so you don’t fall behind.
The next step is figuring out how much you can save each month. Here are a few ways to do that:
- Set a fixed amount to save weekly or monthly and stick with it.
- Choose a percentage of your take-home pay, such as 10%, to save every month. Adjust it if your income changes.
- If you have a specific goal in mind, figure out how much money you need and how much time you have. Then divide the total by the number of months. For example, if your goal is to save $3,000 for a vacation in one year, you would need to save $250 each month.
Once you know how much you want to save, set up automatic transfers from your chequing account to your savings account. It helps if the transfer happens on the same day you get paid.
It’s better to start small and build a habit than to save too much and end up short on daily needs. Even setting aside $20 a week is a good start. The key is to make saving a regular part of your life.
