
How Should I Invest When I Have Multiple Savings Goals?
Balancing multiple financial goals doesn’t have to be overwhelming. Whether you’re saving for a vacation, a new car, your children’s education, or retirement, having multiple savings goals can feel overwhelming. So, how do you save money when you have more than one financial goal? Don’t worry- we’ve simplified this into five easy steps so you can manage and invest wisely to help you achieve all your goals.
- Define Your Savings Goals
- Align Your Investments with Your Timeframe
- Separate Your Goals with Different Investment Accounts
- Create a Budget and Contribute Regularly
- Review and Adjust Your Investments Over Time
1. Define Your Savings Goals
Defining your goals is an important first step. Start by thinking about each of your savings goals and what you’d like to achieve and assign a timeline to each of them. Using the SMART goal framework (Specific, Measurable, Achievable, Realistic, and Timely) can help make your goals more concise and actionable. Typically, your financial goals will fall into one of these three categories:
- Short-term goals: These are goals you want to achieve within one to three years, this could be a vacation, paying off a small debt, or a car down payment.
- Medium-term goals: These might be goals set for three to seven years, such as saving for a home or a wedding.
- Long-term goals: These could be goals like saving for retirement or your children’s education, goals that are 10 or more in the future.
After setting clear goals and timelines, the next step is choosing investments that match your risk tolerance and timeframe.
2. Align Your Investments with Your Timeframe and Risk
Choosing the right investment vehicles for your timeframe and risk tolerance is crucial to ensuring you reach your goals successfully. In the last section, we outlined the timeframe categories goals typically fall within. Now, let’s explore the key factors to consider and the best accounts for different timeframes.
- Short-term goals: Since you need the money soon, minimizing risk is essential. Consider safe and liquid options like high-interest savings accounts, term investments, or GICs (Guaranteed Income Certificates). While these investments might not yield high returns, they will offer stability and growth while protecting your savings from market fluctuations.
- Medium-term goals: With more time to work with, you might be able to take on more risk. A balanced mix of mutual funds, stocks, GICs, and bonds can help your money grow while reducing the impact of potential losses.
- Long-term goals: For long-term goals like retirement, you might be able to afford to take on even more risk since you have years to recover from market downturns. You may consider stocks, index funds, or mutual funds. These options may be riskier in the short term but often offer higher returns over time.
Of course, investing is never “one size fits all” so if you’re not comfortable with market risk, there are plenty of other investment options that we can work with within your timeline. Speak with your Mainstreet and Aviso Wealth Advisor to explore the best options that align with your timeline and risk.
If you are comfortable with self-directed investing our Qtrade Direct Investing® platform lets you manage your investments individually while working towards your savings goals.
3. Separate Your Goals with Different Investment Accounts
To stay organized, it’s a good idea to separate your savings for each goal. This not only helps you track progress but also prevents you from spending money allocated for a specific purpose. Think of each account as a bucket with a specific goal, helping you stay focused and organized. Keeping your buckets separate and organized will also make it easier to see how close you are to reaching your goals. Each investment account offers unique advantages that you can benefit from, so it’s also important to understand which will work best for your financial goals. Let’s take a look at some below.
- Tax-Free Savings Accounts (TFSA): A flexible investment account where you can grow your money tax-free, ideal for short or long-term financial goals.
- Registered Retirement Savings Plans (RRSP): Start planning your retirement with an RRSP. Contributions are tax-deductible and investments are tax-deferred.
- Registered Education Savings Plans (RESP): It is never too early to start planning your child’s education, contributions are government-matched while savings grow tax-free in the plan.
- First Home Savings Accounts (FHSA): Start saving for your first home, contributions are tax-deductible, and withdrawals, for a qualified home purchase, are received tax and repayment-free.
If you’re unsure what account is best for each of your goals, don’t worry, our Wealth Advisors can help guide you in selecting the right account and ensure you maximize your savings with the right account.
Create a Budget and Contribute Regularly
There are several savings strategies that you can use to reach your savings goals, and different strategies work for different people. Automatic contributions to an investment account are one of the easiest ways to save money because it works in the background without you having to think about it. Another strategy is the pay-yourself-first method, which treats savings like a bill you pay to yourself at the beginning of every month. Both strategies help you stay on track to meet your financial goals.
Whichever method you choose, consistency is key. Contributing regularly lets you benefit from compounding interest, but knowing how much you can or should set aside isn’t always as clear. Creating a budget is a great way to understand how much you can set aside each month. It will show you where your money is going and highlight any “leaks” in your spending. If you are unsure where to start, or how much to save, our Mainstreet and Aviso Wealth Advisors are available to help you create a personalized budget and financial plan to determine the right amount for your unique situation – all at no cost!
5. Review and Adjust Your Investments Over Time
As life changes so do your goals. Be sure to review your progress regularly, at least once a year, to ensure you are still on track to reach each of your savings goals. Regular reviews with your Mainstreet Advisor will ensure your plan evolves with you and aligns with changes that may have happened in your life.
By following these 5 steps, you can confidently manage your savings and investments, ensuring you’re on the path to achieving all your financial goals.
Ready to achieve all your financial goals? Visit a branch or book an appointment to get started today.
Mutual funds and other securities are offered through Aviso Wealth, a division of Aviso Financial Inc. Online brokerage services are offered through Qtrade Direct Investing, a division of Aviso Financial Inc. The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This material is for informational and educational purposes and it is not intended to provide specific advice including, without limitation, investment, financial, tax, or similar matters.