Yesterday I went to the bank.
There were two tellers with no other customers to serve. Curious about what kind of personal finance advice or solutions the bank offers, I casually walked up to the counter.
I asked if the bank offers any kind of personal finance advice on how to manage my money, my spending habits, and how to save more money. I specifically was wondering if they had one on one services or an advice centre service to help clients learn how to save money.
The first teller wasn't sure. She initially suggested that I set up an appointment with an investment advisor. But I further inquired that I didn't want investment advice, I wanted saving advice. She deferred to her colleague.
The second teller seemed more certain about what I was asking and initially suggested I used some savings/retirement calculators online. I pushed a little harder, looking for more face to face services and again was suggested to talk with an investment advisor. While I do appreciate that an investment advisor may know some things about saving money, that is outside the scope of their job and therefore more of a personal knowledge rather than a specific service the bank offers.
The only time the bank doesn't make money is when you keep your money between your mattress or in a piggy bank. From the bank's point of view, they make money when people spend money (credit card fees) and save money (what they charge you for borrowing money vs what they pay you on your bank account). So I thought there would be a service or advice centre at the bank that helped people save more money. A specific step by step saving program. But it doesn't seem to exist.
Quite honestly, I wasn't too shocked by the answer I got from the tellers. But I think there is definitely a need for a service like this, especially if it can be provided by a bank to give it a wide reach.
Canadians have a savings rate of only 5% on average. That's even below the 10% the Wealthy Barber recommends. The Chinese are saving 38%. How are Canadians losing by so much?
It's not just that things cost less in China because they also make 5x less than Canadians. It's because there is a cultural norm of taking half of your paycheque and putting it in a savings account and living the best you can on what's leftover.
Just putting half away right off the bat. This is probably the simplest strategy for saving money. It guarantees we live below our means. It guarantees a much more comfortable future. Even if you're money just grows with inflation (the most conservative savers), saving half means you will at most need to work the same amount of years as you expect to live in retirement.
If you think you will live for 60 more years, then you need only work for 30 of those years.
But we have the power of compounding investment returns on our side and we can invest our savings in investments (6%) that will return above inflation rates (2%). This means that instead of work 30 years and retiring for 30 years, we can work for 15 years and retire for 45 years.
Until the banks start offering a service to help us save more money. We will just have to adopt the Chinese strategy of saving half our paycheque.
Think you can do it?
Save Money Retire Early is written by Jon Lo, a barely 30 something change optimist, and personal finance guy. I believe anyone can be rich or poor, it's what you save that makes the difference.