Your group savings plan gives you access to one of the most powerful ways to save – payroll deductions.

Here are 3 ways making contributions to your savings through payroll deductions can help you save more, faster:

1. Pay yourself first

Paying yourself first is a simple way to make sure you’re saving for your future no matter what else is going on in your life. It’s exactly what it sounds like – it’s saving money from each pay “first”. Meaning before you spend it on anything else, a portion gets added to your savings.

When you’re enrolled in a group savings plan  you’re paying yourself first by automatically saving each time you’re paid. When you review your paystub, you’ll notice if one of the deductions taken from your pay is for contributions to your group savings plan.

2. Immediate tax-savings

You can enjoy immediate tax-savings when your payroll deductions are directed to a registered group plan, like a group registered retirement savings plan (group RRSP) or registered retirement plan (RPP).

Here’s how it works:

When you contribute a portion of your pay to your group RRSP or RPP, that amount is deducted before taxes are calculated. For example*, if you earn $1,600 every two weeks and contribute $100, you’ll only pay taxes on $1,500. Assuming your tax rate is 25%, the $100 you contribute will only feel like $75 because you’ve saved $25 in taxes right away. This immediate tax-savings can make it more affordable to save since you don’t have to wait until you file your taxes to take advantage of the tax savings that come from contributing to a registered account.

*This example is for illustrative purposes only. Your tax rate, plan rules and saving options are unique to your personal situation and group plan design.

3. Benefit from dollar-cost averaging (and avoid investing mistakes)

Dollar-cost averaging is a strategy where you invest the same amount of money consistently, regardless of changes to the price of the investment. By making contributions to your investments through regular payroll deductions, you’re automatically using this strategy.

With dollar-cost averaging, when the market is rising, your money will buy fewer units, but when the market is falling, your money will buy more. Over time, investing this way can lower your average cost per unit compared to what you’d have paid if you’d bought all your units at the same time when they were more expensive than the average.

Here are more benefits dollar-cost averaging can offer:

• Removes emotion from investing – Since you’re investing regularly rather than based on the positive or negative feelings you may experience when the market changes, it’s harder for your emotions to interfere with your decisions.
• Keeps you in the market – Instead of trying to buy your investment at its bottom unit price and sell at its top unit price (which is called market timing and is extremely difficult to do since we can’t predict the future), dollar-cost averaging keeps your money invested so it’s there when the market surges.
• Ideal for new investors – Because it allows you to invest small amounts, it’s perfect for investors who are just starting out.

For more information: info@ethicor.com / toll free 1-800-267-3800