Think about your financial goals
Saving and investing can help you reach your financial goals. Writing goals down is a good idea.
To figure out what savings and investments are right for you:
- identify and prioritize your goals, such as saving for retirement or a down payment for a house
- set a dollar amount for each goal
- set a timeframe to reach your goals
As you get older, your financial goals will change. Review your savings and investing plans from time to time.
Keep in mind you're generally better off paying down debt first. This is because the interest you pay on debt is usually more than what you can earn by investing.
To help you get started, fill out the investment goals worksheet.
Get tips on managing your debt.
Set a date to reach your goals
Your goals may be:
- short-term (2 years or less)
- medium-term (3 to 5 years)
- long-term (6 years or more)
The amount of time you have to achieve your goals can affect how you plan to save and invest.
Save and invest for the short term
If you're saving for an emergency fund or a major purchase within a year or two, your focus will be on building your savings. You'll want to keep your money protected and easily accessible.
Short-term savings and investment options
- savings accounts
- short-term deposits
- short-term guaranteed investment certificates (GICs)
- cashable savings bonds
Ask your financial institution or advisor about the different types of short-term investments they offer and how they work.
Save and invest for the long term
If you’re putting money away for a long-term goal, such as your retirement or your child's education, you may want to consider a broader range of investment types.
Longer-term investment options
- bonds, such as Canada Savings Bonds
- mutual funds
- index-linked deposits
- stocks
- long-term deposits
- long-term guaranteed investment certificates (GICs)
Keep in mind that some investments are complex and can be risky. Talk to an investment professional or financial advisor to find the investment that is right for you.
Longer-term savings options
- Registered retirement savings plans (RRSPs)
- Registered education savings plans (RESPs)
- Registered disability savings plans (RDSPs)
- Tax-free savings accounts (TFSAs)
Figure out your comfort with risk
Many investments offer the potential for a higher rate of return but also involve some level of risk. However, the risk may be more acceptable if your goal is longer-term because you have more time to recover any financial losses.
Your comfort with risk depends on your emotional willingness to accept risk and your financial ability to absorb loss. This is known as your risk tolerance or risk appetite.
There are many different types of risk including:
- the risk that your investments will lose money if domestic or global markets decline
- the risk that an investment cannot be traded quickly enough to prevent a loss
- the risk that the value of your investments won’t increase enough to keep up with the rate of inflation
- the risk associated with investing in certain types of businesses, like a business that is part of an unregulated industry
More risk may be acceptable if your goal is longer-term because you have more time to recover any financial losses.
Decide if you want to invest on your own
Investing on your own may be an option if you:
- are confident about your investing knowledge
- have the time to follow developments in the financial market
Many people work with a financial advisor or planner to help them plan and achieve their financial goals.
Related links
FAQs
Savings is setting money aside for use at a later time. Investing is using a resource (usually money) with the expectation that it will generate increased income or grow in value. Think about why savings could be important in your life. Putting aside money for future use can help you meet life goals.
What is an individual's most important savings goal for __________? ›
Long-Term Financial Goals. The biggest long-term financial goal for most people is saving enough money to retire. The common rule of thumb is that you should save 10% to 15% of every paycheck in a tax-advantaged retirement account like a 401(k) or 403(b), if you have access to one, or a traditional IRA or Roth IRA.
Why is it important to set goals when saving and investing for the future? ›
Reaching financial goals is important because it allows you to make smart money decisions, improve your lifestyle, reduce debt, and plan for retirement. Setting specific financial goals will provide a sense of direction, purpose, and motivation, keeping you on track to achieve financial success.
Why is it important to set a savings goal? ›
Saving is about setting aside money for the future. But it's just as important to know what you're saving the money for. That's why it's a good idea to have financial goals. Specific goals can help you stay focused and target your savings.
What is the main goal of investment? ›
Safety, income, and capital gains are the big three objectives of investing but there are others that should be kept in mind as well.
What are the three types of investment goals? ›
Once you've answered those questions, you can begin to weigh the three primary investment goals--growth, income, and stability or protection of principal--to determine how to select specific investments that are appropriate for your financial plan.
What are the three importance of saving? ›
Saving is an important habit to get into for a number of reasons — it helps you cover future expenses, manage financial stress and plan for vacations, just to name a few. Understanding the different merits of saving might motivate you to save more.
How do you prioritize savings goals? ›
How to Save for Multiple Financial Goals
- Prioritize. Make a list of all the things you want to save for and how much you'll need for each purpose. ...
- Categorize. Once you've prioritized your goals, sort them by how much time you have to save to meet each objective. ...
- Invest. The next step is to start investing. ...
- Review.
Overview: Best investments in 2024
- High-yield savings accounts. Overview: A high-yield online savings account pays you interest on your cash balance. ...
- Long-term certificates of deposit. ...
- Long-term corporate bond funds. ...
- Dividend stock funds. ...
- Value stock funds. ...
- Small-cap stock funds. ...
- REIT index funds.
Most financial experts suggest you need a cash stash equal to six months of expenses: If you need $5,000 to survive every month, save $30,000.
Create a budget:
Making a budget is the first and the most important step of money management. It is a fairly simple measure and has been used for centuries.
How to set yourself up for financial success? ›
- Choose Carefully.
- Invest In Yourself.
- Plan Your Spending.
- Save, Save More, and. Keep Saving.
- Put Yourself on a Budget.
- Learn to Invest.
- Credit Can Be Your Friend. or Enemy.
- Nothing is Ever Free.
While the size of your emergency fund will vary depending on your lifestyle, monthly costs, income, and dependents, the rule of thumb is to put away at least three to six months' worth of expenses.
What does it mean to pay yourself first? ›
When you pay yourself first, you pay yourself (usually via automatic savings) before you do any other spending. In other words, you are prioritizing your long-term financial health.
What is the purpose of savings and investment? ›
The Bottom Line. Saving and investing are both important components of a healthy financial plan. Saving provides a safety net and a way to achieve short-term goals, while investing has the potential for higher long-term returns and can help achieve long-term financial goals.
What are the basics of saving and investing? ›
Saving can also mean putting your money into products such as a bank time account (CD). Investing — using some of your money with the aim of helping to make it grow by buying assets that might increase in value, such as stocks, property or shares in a mutual fund.
What is the primary purpose of investing? ›
Investing is an effective way to put your money to work and potentially build wealth. Smart investing may allow your money to outpace inflation and increase in value. The greater growth potential of investing is primarily due to the power of compounding and the risk-return tradeoff.
What are the two major financial goals of every saver and investor? ›
Save to meet short-term goals like building an emergency fund. Investing means putting your money into a riskier vehicle with the expectation that your money will grow over time. Investing involves more risk, but could come with higher returns. Invest for long-term goals (e.g., retirement, paying for college)
