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The Canadian federal government eliminated the accumulation of interest on Canada Student Loans, as of April 1, 2023, but you must still pay any interest accrued before then. Some provinces and territories—Alberta, Saskatchewan, Ontario, Quebec, Nunavut and the Northwest Territories—charge interest on their portion of student loans. The interest rate varies, but it’s typically the prime rate plus a percentage. Ontario, for example, calculates interest at prime rate (currently 7.2%) plus 1%.
2. Build an emergency fund
Once your credit card debt is paid off and you’re on track with repaying your student loans, next on the agenda should be building an emergency fund, which should cover at least three months of living expenses. This will be helpful for situations like getting laid off, a car breakdown, a sudden health condition that doesn’t allow you to work, and so on.
You do have a few options for where to stash your cash, including registered accounts, but in an emergency, you’ll likely want fast and easy access to your money. A high-interest savings account (HISA) pays significantly more interest than a regular savings of chequing bank account, and you can withdraw the funds anytime.
3. Set goals—and set up savings plans to fund them
Once you have a solid debt repayment plan and an emergency fund, you can allocate some funds towards your future financial goals. Maybe you’re adopting a pet, or you’re starting a side hustle and need start-up costs. Maybe you’re aiming to take a big trip or buy a car in the next few years. An automated savings plan—which transfers a set amount to a specific savings account—can help you accomplish this faster. At CIBC, for example, you can set up AutoSave in your bank account to transfer a set amount—say, $100—to a specific savings account each time your paycheque is deposited. (This is what financial experts mean by “paying yourself first”!)
Your monthly contributions may be as small as $20 a week or as high as $100 or more, but the key is that they will add up over time. You want to maximize the interest you earn on it. Remember that compound interest info above? It applies in a positive way, too. You can earn interest on the interest you’ve saved. Check out our compound interest calculator—it may blow your mind to see how savings can grow over 30 years. (Your parents and future financial advisor will be impressed, too.)
Again, a HISA is a good option that pays more interest than a regular bank account. Currently, you can find HISAs with interest rates of 2.5% to 5.75%, which might include limited-time promotional offers* that pay additional interest for a few months to a year. While these rates can change, using a HISA can be a great wealth-building tool in the short term. And if the HISA is held in a TFSA, all the investment income you earn is tax-free.
Boost your savings with a special interest rate when you open your first CIBC eAdvantage Savings Account. Limits apply.
4. Choose your financial advice carefully
Parents and friends all have their own ideas about how best to save—especially if they’ve had success buying real estate or made a lot of money investing in the stock market. While some of their tips might be valid, true, their advice might not apply to your unique financial situation.
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Anna Sharratt
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