Paying yourself first the secret to saving money

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We would all like to be able to save money, whether its to buy a home, save for a child's education,prepare for retirement or just have some money set aside for a rainy day. The question on most people's minds, however, is how to save when just making the money stretch as far as it has to is a challenge in itself.

Keith Martel, chairman of the board of the First Nations Bank of Canada has some answers. Martel is a member of the Waterhen Lake First Nation and is a chartered accountant by trade. Speaking from his Saskatoon office, he said putting money aside is something everyone should work toward, no matter what age they are.

"Having some capital saved, which can be cash in the bank or equity in a house, provides stability," he said. "First Nations people are starting to get educated, to move to urban centres and put down roots there." Savings set aside will enable an individual or a family to survive a job change or unexpected sickness when flow of income may be interrupted. "And the day is going to come when we are all going to be retiring and need income from other sources than our jobs."

Besides peace of mind, having savings gives us choices, he added. "Being able to travel occasionally or purchase a new car is possible only when we set aside a small portion of our income regularly and let it grow," said Martel.

Another good example is budgeting household income to save the required five or ten per cent necessary for a down payment on a house. "We all want to be out of the trap and cycle of renting," he said.

Many people say they never have any money left over at the end of the month to put away for the future, but according to Martel, what these people need to do is simply change their approach to saving.

"There will never be money left over. Each one of us has to decide what is going into savings and pay ourselves first, even though it's difficult to do," he said. After a few months, a nice amount will have accumulated and will encourage further savings.

Parents can urge their youngsters to set aside part of their spending money in a savings account. By the time they're 18 they should be contributing regularly to investment vehicles, and, if they qualify, invest in Registered Retirement Savings Plans, he said.

"If young people started planning financially for their retirement then, they'd have an amazing nest egg. If they wait till they are 50, they'd have to put almost every available cent away, and they'd find themselves regretting they hadn't started earlier." A combination of mutual funds and cash investments will ensure savings will weather the cycles of the investment markets.

"We tell our clients that the first step is to establish their present financial situation, and what type of investments are best for them. Get involved in employer pension plans if possible, and ask employers to sponsor seminars where financial planners will hold information sessions. Read publications aimed at first-time investors, available at banks or libraries everywhere," he said.

"I've seen people's small efforts turn into big savings, so I can attest to the wisdom of setting aside even a tiny amount on a regular basis."