Wise ways to invest your money at different life stages

Life is full of surprises. While some life moments may not be meticulously planned, there are things such as your investment strategy that can be a little more predictable.

While people commonly think of life stages as a timeline with a pre-planned sequence, these moments can actually happen in any order you choose. In this case, there’s no such thing as one-size-fits-all.

Getting a post-secondary education, starting a new job, buying a home, getting married, growing your family with kids and loved ones, renovating the home, taking vacations and planning for retirement — all of these moments can enrich us in many ways at different times of life. What’s certain is that each life moment comes with financial demands. 

So which investment goals should you be focusing on in each stage of your life — and how can you achieve them?

Life stage: Planting roots

At this stage, you are likely laying the foundation for where you live, your work, your family and your social life. This may be the first time you’ve “planted roots,” or you could be relocating to a new city or neighbourhood, changing jobs or industries, or have welcomed new family members into your life. 

No matter what, there’s a world of possibilities ahead of you, and it can be a wonderful time.

If you’re just starting out in your investment journey, this is also an exciting moment — albeit a little intimidating. You may still be in school or have recently graduated, and still have some student debt to pay off. 

You may also be establishing your savings goals and investment strategy at this stage, and there are several savings goals for you to focus on while planting roots:

  • A down payment on a new home: Start saving early to get into your own home sooner and to avoid having to pay mortgage insurance with a down payment below 20%. Remember that any down payment below 20% will require mortgage default insurance. The lower your down payment, the higher the premium, though it can be added to your mortgage amount.
  • An emergency fund: This will help keep your budget and savings on track, and give you peace of mind if the unexpected should happen.
  • Your retirement: Start now with even a little bit of investment and enjoy decades of compound interest.

For your short-term savings goals, you might dip your toe into investments with flexible, low-risk options like GICs. For your future retirement, invest mostly in mutual funds and stocks: you have plenty of years to ride the ups and downs of the market. 

Also, if your employer offers a pension fund they contribute to on your behalf, take it. It’s free money. 

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Life stage: Expanding your family

Things move up a gear when you add kids to the mix or welcome extended family members to live with you. For example, your parents or in-laws may move into part of your house, or you may need to add new rooms to your house as kids grow older and need more space.

At this stage, your savings goals change a little. You may still be saving for a down payment on a first home, needing to renovate an existing space, or needing to find a new house to fit everyone in. At this time, you should also consider keeping an emergency fund of three to six months of fixed expenses. 

As far as your investments, now’s the time to boost your retirement savings with around 15% of your income, with at least 80% in stocks. If you have kids, an RESP is a good option, with the government matching up to 20% of what you save. Mutual funds and ETFs can help you easily diversify your investments. 

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Life stage: Established and comfortable

At some point, you’ll likely feel like you’ve hit your stride. You may have been at your job for a while and feel good about the earnings you’re making, and your future potential. You may be approaching your maximum earning years, and this is a great time to build up the amount you save for retirement. 

Consider diversifying your investments even more with stocks in Canada, the U.S., emerging markets and real estate. Depending on your risk tolerance, 80% in stocks will provide the best opportunity for high growth. Also max out your RRSPs, as the tax savings could be considerable. 

While RESPs and of course your emergency fund may still be priorities, there are many things that can derail your plans. For example, some people may need to help out a family member going through a tough time or you may go through a separation or divorce. Others may need to do important home renovations, repair a car or deal with any other type of expensive situation.

Try to tighten your belt if anything unfortunate happens, and look for ways to keep your savings on track. 

Consider people, planet and prosperity
Whether now or in the future, consider the impact your actions make on the world around you. With socially responsible investing options, you can have your investment cake and eat it, too!
Learn more about responsible investing, including how the pandemic has made it a more relevant option for many members.

Life stage: Focus on retirement savings

At some point, you’ll be counting down the days to your retirement. As your earnings peak, you can try to maximize your RRSP and TFSA contributions. And if you have kids, as they grow up you’ll want to shift RESP contributions over to your retirement investments. 

Also, start to pay down any debts, as you don’t want to make any extra payments when you retire. For example, pay down more principal on your mortgage (you can usually pay up to a certain percentage each year without a penalty) and prioritize paying off credit card balances.

As far as your investments, you may want to consider reducing the percentage you put in stocks to protect your principal. Look to GICs and investments that won’t lock you in for a long period of time.

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Life stage: Easing into retirement

At this stage in life, focus on paying off any outstanding debt (especially credit cards) and maximizing your retirement savings. You may now want to consider a more conservative asset mix and bring stocks down to as low as 40%. 

Increase the amount of secure investments, such as bonds, and consider buying high dividend-paying stocks. They provide income you can add to savings, from established and therefore typically more secure companies. 

If you haven’t saved enough to retire comfortably by the time you’re 65, consider working longer and delaying your CPP – the longer you wait, the more you will receive. 

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Getting the help you need for successful investing 

Knowing exactly how much you should save at each point in your life can be tricky on your own. An ACU financial advisor can help you to work out the amount to invest, how to diversify and the best mix of stocks and bonds to suit your risk tolerance. 

Digital Appointment Booking

Book an appointment online today so we can start building your investments together. 

About James Burns

James Burns is a freelance writer and copywriter. With a background in journalism, financial services and marketing, he writes for a wide range of companies across the financial services spectrum. His articles and blogs provide financial advice and insights to both consumers and businesses.

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