Dale Jackson

Personal Finance Columnist, Payback Time

Follow|Archive

Caps will be flying at graduation ceremonies across the country in the coming weeks as university and college students get set to take on the world. For many, that means wading through mountains of student debt to chart a course to a wealthy future.

While investment trends may change over time, there are four basic truths to growing your savings, according to financial advisor Richard Paul from Richard Paul & Associates:   

1. Automate your contributions. When you start investing at a young age, time is on your side because returns have many years to compound. Once you start working, set up a regular contribution plan. You probably won’t miss the money in the short term. Canadians have the advantage of investing in a tax free savings account (TFSA) where investment gains are never taxed. If your employer offers to match contributions into your retirement account, be sure to take advantage of that. That’s free money.
2. Get out of debt. Debt also compounds, but in the opposite direction. The sooner you create a plan for getting rid of it, the more you will have to invest. Debt itself might be considered an investment of sorts because each dollar spend on debt is equal to a risk-free return equal to the interest rate.
3. Build your credit. Your credit score is an indicator of your financial health and it can lead to a low-interest line of credit when you get older. Damaged credit can be costly over time. Pay all bills on time by setting up payment reminders or enrolling in auto payments. Pay down balances on credit cards, which charge interest as high as 30 per cent.
4. Buy low, sell high. If the stock market sells off by five to 10 per cent over any given month or week, buy the dip. On the flip side, when the market is going up significantly, wait for a correction.