• You need an emergency fund which will give you daily comfort and keep you out of trouble, allowing you to pay the bills for a few months if you lose your job, get sick or face a financial emergency.
   
• You need to fund your retirement to keep your quality of life in your later years. The tax incentives make it an attractive place to put your savings.
   
• For those of you who have children, the education fund is a must if you don’t want to find yourself cash strapped and back in debt just as the kids are leaving home,
   
• You may also want to consider a vacation fund, or a “fun” fund. For some of us, that’s usually one of the top four or five biggest expenses, after housing, cars and food.

Prioritize:

• When you’re starting out, saving money from a first-job salary is tough, but once you get in the habit, it will pay huge dividends. By transferring a little money to your savings account every paycheck, you will accumulate an emergency fund off the bat. If you have a lot of high-cost credit cards, get rid of them. When those two categories are taken care of, you can start saving for retirement taking advantage of the tax breaks. Then you can start building other savings and reserves, for things such as buying a car, a down payment on a home, or anything else that gives you the flexibility to do things you really want to do. A tax-free savings account is a great vehicle for this type of savings.
   
• When you have a family, you will want to start thinking about a college fund when your kids are young and you have a lot of years to save. You should be taking care of your emergency and retirement funds first, but consider a small contribution to an RESP to get it started and take advantage of the government grant portion that will accumulate and grow over the years. College is expensive, but you don’t need to have it fully funded before your child leaves high school. If you are paying down your mortgage, that’s another good form of savings that will give you extra cash flow when the kids actually start post-secondary education.
   
• When the kids leave home, people in their 50’s and 60’s should focus on building up their retirement savings, aiming to contribute the maximum, and catching up on their contribution room, plus whatever else they can save outside those accounts. This is one of the most challenging stages, because children are much slower these days to leave the nest, and often come back before being on their own for good. You may also want to reallocate the education fund contributions towards long-term care, which covers home health aides or nursing-home care.
   
• When you retire, funds needed for the next three years or so should be in cash or short-term investments so they won’t be subject to stock-market fluctuations. You may also want to consider funding the vacation or “fun” categories. Funds you won’t need for five to ten years should be treated as medium-term savings, while funds that won’t be needed for 20 years will be your long-term savings.

Although it may seem that there are more savings categories than money available, the important thing is to start. Put your priorities in order, review your budget and allocate whatever you can to each category with the goal of increasing those amounts over time.

The financial calculators link to the right is a great place to start. You can calculate your budget, find out how much you will need to retire, how much you need to fund the college fund, how long it will take you to pay down your mortgage, etc. As always, we are just a telephone call away if you need any assistance or have any questions.

 
Theresa Wever and the Money Concepts Team.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.