When you’re saving money for something, you can do little things every day to keep cash from going out the door and help build your investments.
For example, many people might make their own coffee and bring their lunch to work.
Savings from doing things like this can add up to hundreds, if not thousands, of dollars a year.
But there’s another way to save money with much less thought and discipline.
Investors can set up an automatic transfer that moves money to their investment accounts on a regular basis.
Also known as a pre-authorized contribution (PAC), it can put more money toward your investments.
This way, you don’t have to worry about setting money aside to make a lump-sum contribution to your investments once or twice a year.
With a PAC, you’re contributing to your investments throughout the year. That can, for example, help your investments grow more quickly than waiting for one contribution during RRSP season.
For instance, if you invest $100 a week for your retirement, you could accumulate $197,000 after 20 years – assuming a rate of return of 6% a year.1
It’s also easy, with a “set it and forget it” approach.
Some investors set the automatic payment to happen on their payday, likely a bi-weekly basis. This way, investors can pay themselves first.
Paying yourself first means saving a set amount first and only spending what’s left over – rather than the other way around.
Investors can change the amount and frequency of automatic contributions at any time.
As well as making investing easier, a PAC can also help you handle market ups and downs because you’re investing on a regular basis over time.