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Saving for retirement is something every Canadian must do, but many of us put it off far longer than we should. There are about a million reasons not to save for retirement, here are some the most common ones:
All of these situations have financial ramifications that can make carving out the money to save for retirement incredibly difficult, and in your earlier years, you might make the mistake of thinking that you are too young to save for retirement.
The truth is, you are never too young to start saving money for your golden years. In fact, the younger you start, the less you’ll have to save. Below I’m going to go through why it’s never too early to start saving for retirement.
The Magic of Compound Interest
The big reason that it’s important to start saving as early as possible is because of the magic of compound interest. Put simply, compound interest is when you earn interest on a set amount of money, and then the interest you earned, also earns interest, compounding every year.
Let’s look at a simple example:
You deposit $100 into a savings account that earns 3% interest per year. At the end of year one, you’ll earn $3 in interest, for a total balance of $103.
At the end of year two, you’ll earn 3% interest again on the $103 balance, or $3.09, for a total balance of $106.09. At the end of year two, you’ll earn another 3% interest on the $106.09 balance, or $3.18, for a total balance of $109.27. As your balance grows, so does the interest you earn, compounding every year.
Here is a table showing the interest earned over a ten year period.
As you can see from the table above, every year the interest you earn increases a little bit, because you are earning interest on your interest. While the difference from year to year may not seem substantial, the more the account grows, the bigger the jumps in interest will be, and they’ll get especially large in the later years. So the longer you can let your money grow, the better.
To give you an idea how much your money would grow of the course of your working years, say, 40 years, the original $100 would be worth $326.20 in 40 years.
Save a Little Today, Or a Lot Later
So we know that the earlier you start saving, the better your retirement account will look, but what about if you have a target end goal in mind?
For example, I’d like to retire with a million dollars in my retirement account. I feel that one million dollars would allow me to live a life comparable to what I’m living now, for my entire retirement.
I know that starting to save for retirement earlier is better, but just how much better? Here’s an example to show you.
Let’s assume I start saving for retirement at age 25 and I want to retire at 65. That is 40 years to save for retirement. If I save $6,000 per year (that’s $500 per month) starting at age 25 and invest that money in mutual funds with an average rate of return of 6%, I’ll end up with $1,046,000 at age 65. Perfect!
But what if I don’t start saving until I’m 35? Well, my compound interest will have much less time to do its thing, and I’ll need to save more to compensate. Here’s how much more:
I’ll need to save $12,000 per year (that’s $1,000 per month) to retire at age 65 with $1,076,000 in my bank account. By delaying by just ten years, I’ll need to double my total retirement contributions to make up for the work that compound interest does automatically.
I don’t know about you, but I’d rather keep that extra $6,000 per year in my pocket and start saving early, even if it’s not easy on my budget.
Don’t Let Fear Stop You
Many millennials put off investing their money for years because they don’t trust the stock market, they aren’t sure where to put their money, or they don’t know if it’s a good time to invest. While there are certainly terrible places to invest your money, with a little research, it’s easy to understand the basics of how the stock market works and where to put your money. I highly recommend reading the following books if you don’t know where to start:
Stop Over-Thinking Your Money by Preet Banerjee
Wealthing Like Rabbits by Robert Brown
The Millionaire Teacher by Andrew Hallam
These are some of my favourite authors, and they take the mystery out of handling your money. These books should be available at your local library branch, so you don’t even need to buy them to benefit from their wisdom.
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goeasy collects and uses personal information for purposes limited to those which are related to its businesses, which include providing household furnishings, appliances, and home electronic products to its customers under lease agreements, staging services, mortgage brokerage services and financial services. We collect personal information primarily from you, for instance through applications and supporting documentation you provide. We may also collect personal information about you through your ongoing interactions with us, from references, employers and other financial institutions you have identified in your application as well as credit bureaus and other third party sources. For example, we may collect personal information from credit bureaus for the purpose of locating you to collect outstanding debts. In connection with loan agreements, we may also collect personal information from credit bureaus in order to verify your current and ongoing creditworthiness and other information you may provide to us.
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goeasy limits the amount and type of personal information collected to that which is necessary for our identified purposes, and we collect personal information by fair and lawful means.
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goeasy may disclose personal information in a number of circumstances, including:
In addition to the above, personal information may be shared between our affiliates or subsidiaries (including those located in the United States) for internal audit, management, billing or administrative purposes including defending and bringing legal actions.
In the course of fulfilling the purposes described above, goeasy may transfer your personal information to service providers, including affiliates or other third party organizations or individuals retained by goeasy to perform functions on its behalf, such as marketing, data processing, customer service, office, security, collections, insurance, financial and taxation services. When personal information is transferred to service providers, we use contractual or other means to ensure that a comparable level of protection is provided. Some of our service providers may be located outside Canada and will be subject to applicable legal requirements in that country including lawful requirements to disclose personal information to government authorities in certain circumstances.
If you are a resident of the Province of Quebec, you understand that we may transfer your personal information to a third party based outside of the Province of Quebec, or store it outside of the Province of Quebec, the handling (including the disclosure to third parties) of that personal information will be subject to the laws and regulations applicable in that jurisdiction and you consent thereto.
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goeasy may establish and maintain a file containing an individual's personal information for the purposes described above, which will be accessible at our offices. Individuals have the right to request access to or correction of their personal information that is held by goeasy. Requests must be made in writing, addressed to goeasy's Privacy Officer as per the contact information set out at the end of this Policy. We will respond to written requests within a reasonable time. Copies of records containing personal information may be subject to a fee. If this is the case, goeasy will inform the individual of the amount of the fee in advance. We will use our best efforts to ensure that personal information is as accurate, complete and up-to-date as necessary for the identified purposes. If an individual successfully demonstrates the inaccuracy or incompleteness of personal information, we will amend the information as required. If we refuse access to personal information or disagree with an assertion that information held by us is incorrect, we will provide a written explanation for such refusal and a description of our complaints procedure should an individual decide to challenge such written explanation. An individual's right to access or correct personal information is subject to applicable legal restrictions. To prevent fraudulent access to the personal information stored by goeasy, we may take reasonable steps to verify an individual's identity before granting access or making corrections.
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Inquiries or Further Information
Privacy Officer, goeasy Ltd.,
33 City Centre Drive, Suite 510
Mississauga, Ontario, L5B 2N5, Canada
If you are not satisfied with our response to a privacy-related matter, you may contact the Office of the Privacy Commissioner of Canada at 1-800-282-1376 or at www.privcom.gc.ca. or in Alberta or British Columbia, your provincial privacy regulator, as applicable.