Money & Career

The secret to increasing your RRSP savings

Author: Canadian Living

Money & Career

The secret to increasing your RRSP savings

With the RRSP deadline around the corner, many Canadians are searching under every last pillow -- or applying for a loan -- to find some money to put in their accounts. Instead of panicking every February, consider setting up a Pre-Authorized Contribution program, which automatically puts money into your RRSP on a set schedule. Here are four reasons why you should consider a PAC.

Stop worrying

Typically, Canadians scramble to put some money in their accounts by RRSP deadline day and many realize too late that they don’t have anything to add. A PAC makes contributing simple. Every month -- or another time period, such as every week or two weeks -- a set dollar amount will be taken from your chequing or savings account and deposited into your RRSP. You can rest easy knowing that you’ll always have money going towards your retirement.

Don’t spend your savings

A PAC also stops you from spending your retirement savings on frivolous things. If the money stays in your primary bank account, it’s more likely you’ll spend it. By setting up automatic RRSP payments, you won’t waste that money on stuff you don’t need.

Make more money

Contributing a lump sum at the end of the year is better than nothing, but you’ll make more if you contribute every month. If you invest even a small amount in January it has 12 months to grow. If it’s a dividend stock that pays money to shareholders, you’ll get four quarterly payments by the end of the year. That money, which stays in your RRSP, will grow month after month.

Top up your RRSP

Just because you have money going into your RRSP every month doesn’t mean you shouldn’t invest any extra dough come deadline time. But because you’ve been investing regularly, the top-up won’t be as much as if you had contributed nothing in the previous 12 months. It’ll feel better putting a smaller lump sum in the account than having to invest a few thousand dollars all at once.

It’s hard to argue against setting up a PAC. It’s easy to do -- just call your bank, or set it up yourself using online banking -- and it makes saving a cinch. You won’t know notice that the money’s gone missing, you won’t buy useless things and, best of all, you’ll have saved a ton of money by the time you retire.

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Money & Career

The secret to increasing your RRSP savings