Get your savings in shape

Carrie Russell, Senior Vice President of Retail Banking for TD Canada Trust. My friend started the new year with a 'cleanse' where she ate nothing but cabbage soup for a week. The idea was to kick-start a routine of healthy eating and exercise. Admirable goal. But it didn't work. After four days on her cabbage soup diet, my friend felt so deprived she snuck down to the kitchen at 11 p.m. and washed down two brownies with a glass of red wine. Plus, eating nothing but cabbage soup meant she didn't have enough energy to do any exercise. So much for the good routine.

As much as we'd all like a quick-fix, the best way to get in shape is through a manageable routine that motivates you and doesn't leave you feeling deprived. The same can be said about saving money; a great strategy for getting your savings in shape uses a combination of simple, effective tools that allow you to save for now, plan for the future and ensure you don't feel too deprived along the way.

The dynamic duo of savings are a and a Even if you have limited funds, putting money in both an RRSP and a TFSA can help you maximize what you do have.

Imagine you are in your mid-twenties, making $30,000 a year. It can be tough to think about retirement when saving for a trip is what's on your mind. But, the fact that retirement is so far away makes this an ideal time to start an RSP. Just $100 a month can make a big difference; investing $1,200 a year starting at 25 can become more than $200,000 by the time you are 65!

However, you might have more immediate savings goals, so you don't necessarily want to put all of your money into your RSP. This is where the TFSA comes in. Normally, you are required to pay tax on the interest you earn from savings and investments. A TFSA lets you earn interest tax-free. Your $100-a-month vacation fund grows faster, getting you closer and closer to the beach.

The ideal way to save money is to get into a routine of monthly contributions to both your RSP and TFSA. Not only will this get your savings into top shape, focusing on both your long-term (retirement) and short-term (trip) savings' goals, but you aren't likely to feel deprived - if that $1,200 you put in your RRSP means a $250 tax rebate.