Let time do the heavy lifting

Key points

• November is Financial Literacy Month.
• Take it from someone who didn’t have a good retirement savings plan in place: don’t wait until you are older to do so. 
• Recognizing that it's not always possible, put time on your side and start saving as early as you can.

“Time is a jet plane, it moves too fast”

—Bob Dylan

It’s not Dylan’s most famous line, but the idea that time can move too fast is a great reminder to invest for your retirement as early as you possibly can. I know that this is good advice, because I didn’t follow it!

The stats on this are startling: only 40% of Canadians aged 18-34 are financially preparing for retirement on their own or through an employer pension plan. It doesn’t get much better for older Canadians at just 55% for those aged 35-54 and 51% for those 55+. What’s more, only 32% of non-retirees have a good understanding of how much they need to save for retirement.

Listen to your elders

November is Financial Literacy Month, and while I’ve learned a great deal about personal finance during my years at ATB, I knew almost nothing about it when I began my career.

Back when grunge music was still a new thing, I was told by a financial advisor to start saving for retirement, even if I could only afford to put a little away each paycheque. I scoffed. Retirement? I just finished school (with the loans to show for it), I’m barely getting by, and I won’t be retiring for decades.

Luckily, my employer had a matching RRSP program, so I did sock a little money away. But, in my defence, life got in the way. I got into debt and needed to cash in my RRSPs. I was still youngish, but I was back at zero in my retirement account. Some lean times and a few bad decisions later, and I still didn’t have much saved and I realized time was indeed moving too fast.

I buckled down and started adding to my retirement fund as often as I could. Not everyone is this lucky, so I’m happy I was able to do this. I would, however, be a lot happier, and looking at a better financial situation when I do retire, if I had found a way to save early and leave it alone to grow.

The reason is that, when it comes to investing, time = money. Put a little money into a long-term savings vehicle (making sure to get the advice of a professional on which vehicle is best for you) and you can watch as it grows. You don’t have to do anything. Compound growth and market growth do the work for you.

But it takes time. The more time, the more growth. There is always risk involved—individual stocks, for example, tend to go up and down—but history shows that prudent, diversified investments are highly likely to pay off over time. Investing over a long period, in fact, allows you to ride out the market volatility and gain from the long-term upward slope of equity markets.

It’s not always possible to put money away, even a small amount. If you’re skint, you’re skint, and life happens. And when it does, don’t beat yourself up about it (I’ve tried not to).

The lesson, instead, is don’t wait to start saving. Talk to a professional and do what you can as early as you can. Put time on your side.

It’s also never too late. Even a short amount of time can yield growth that will come in handy down the road.

Answer to the previous trivia question: The last time an Alberta team won the Grey Cup was on November 25, 2018, when the Calgary Stampeders defeated the Ottawa Redblacks 27-16 in the 106th Grey Cup.

Today’s trivia question: What is the largest stock exchange by market capitalization?