Canadians are having trouble saving money. The latest data from Statistics Canada suggests that the average savings rate has dropped from 16% in 1985 to -0.5% in 2005. Today, a negative savings rate simply means that Canadians are spending more money than their current disposable income.

This lack of savings is further illustrated in a study by Mackenzie Financial suggesting that 56% of Canadians feel they are not saving enough for retirement. In fact, Canadians have used less than 10% of the total RRSP contribution room available. A recent study by Statistics Canada suggests that the total contribution space is about $342 billion and only $27.6 billion of that room has been used.

If you take into account that there is more pressure on Canadians to self-fund retirement, this lack of savings is a very serious problem in our country. So how do we get people to save more money? Here are some of my tips on how you can get on track to a regular savings plan.

• Track your expenses. The first place to start is to understand where your money is being spent. Tracking your expenses will help you to recognize areas that can be changed.
• Only use one payment method. Tracking expenses can be very difficult if you are using a couple of credit cards, your debit card, and cash. The key is to keep things simple and by only using one payment method it will be infinitely easier to track your expenses. In our household, we use one credit card for all our expenses. When the bill comes in, we know how much we’ve spent in the month. We also do this so that we can collect travel points in one place. The key is to make sure that you pay off those credit card bills every month.
• Stop using cash. Have you ever gone to the ATM machine, take out $100 and before you know it, the $100 is spent? Spending cash is the most difficult to track. Spending cash is often the source of unknown leakage of expenses – a chocolate bar here, a magazine there, parking, a drink, and a snack, etc.
• Set up monthly automatic savings. Once you know where your money is going, you will see that you are paying everyone else first and saving what little you have leftover. It’s time to break the pattern and start a monthly savings plan right away. Your future is too important for you not to pay yourself first.
• The earlier you start the better. It’s never too late to start. so start right away. Time and compound interest have often been referred to as the eighth wonder of the world. When you understand the power of compound interest, you can’t afford to wait any longer.
• Something is better than nothing. Investing in money regularly needs to become a disciplined habit. No matter how much or how little money you have, you need to get into the habit of disciplined saving. Even if it is as low as $25 per month, something is better than nothing.
• Increase your investment regularly. When it costs you more money at the pump to fill up your gas tank or when the price of fruits and vegetables goes up 10% or when your utility bills increase, what do you do? Often we have no choice but to pay those bills as part of our lifestyle expenses. Each year that passes or each time you get a raise, make sure you increase the amount of money you save accordingly. If inflation rises by 3% and your expenses increase, make sure you also set aside more money for you first.

Three key ingredients for the perfect saving plan

Saving money is simple, not easy. Most of us know what we have to do but the ‘doing’ is the difficult part. If starting a savings plan seems difficult, first remember three key things. First, saving money requires effort. It only comes naturally to a few. For most of us, unfortunately, it is work but the rewards are huge. Secondly, it takes conscious awareness. If it does not come naturally, you need to find ways to constantly remind yourself to participate in savings. Write little notes to yourself, or put up sticky notes in your bathroom, or schedule it into your daytimer or find a support mechanism like a spouse or a friend. Lastly and most importantly, saving money requires discipline. It’s been said that a habit takes 21 days to form. Make sure savings become a habit, second nature and with discipline, you will be on your way to financial success.