Canadian Living: What is the ideal age to set up a budget for retirement?
Tom Zaks: Many young people feel like they have lots of time ahead of them to start saving for retirement. Then one day they wake up and have minimal savings set aside for their golden years. If you can get into the habit of saving on a monthly basis this habit will last throughout your lifetime. The sooner the better is always the ideal.
Canadian Living: How does age factor into setting aside money?
TZ: Age is a tremendous factor due to the power of such things as compound interest and dollar cost averaging. With compound interest, the more you save, and the longer that money earns money, then the larger your nest egg will grow. The same thing applies to dollar cost averaging, which is the concept of buying into equities on a regular basis at different prices. As the markets go up and down in the short term, the investor will be able to buy at different prices, including dips in the markets. As the market goes up over time, this will have a powerful affect on how these investments grow.
Canadian Living: Is there a rule of thumb for saving for retirement?
TZ: There are many rules, but one that stands out is the old adage "pay yourself first." This is all about setting aside money with each paycheque, and the earlier on an investor learns this lesson, the better.
Page 1 of 2 – Discover real-life strategies to help you save for your retirement on page 2.
