How to Save Money In Canada - Preparing for the Next Crisis

With the strain the COVID-19 economic crisis has placed on our wallets, Canadians are struggling to make ends meet. Saving money has fallen low down on many priority lists, but deep down we all know we should be saving for the future - not just for retirement, but for the next crisis. According to Bloomberg News, the Canadian savings rate averaged 1.4% in 2018. In a 2020 survey by Finder, a financial research company, only 12% of Canadians plan to put any money aside this year. That's no surprise.

A New Way To Save Money

As our wages struggle to keep up with inflation, it's time to face the reality that saving money the traditional way won't work the way it did for our parents and grandparents. Their pensions barely keep them afloat as it is. The new way to save is to create assets that will generate income in the future. So instead of thinking of saving as putting money in an RRSP or pension plan, we need to start thinking of putting money into income-generating assets that will produce an income for us in the future. We need to create assets for short-term income, suitable for worldwide pandemics and other unforeseen events, and we need assets for long-term savings that we can use in retirement.

Income Generating Assets - Your Savings Account

Here is a list of income-generating assets that you can use as your "savings accounts" to generate income in the future, listed in no special order:

1. A rental property - long-term savings - Before you say, "That's unrealistic. I can't afford a rental property," consider that you can invest with relatives or friends until you make enough money to own a property of your own. If you own a home you can renovate your basement into a legal apartment. If you can't renovate your basement just yet, you can rent a room in your home and save the rental income towards a down payment on a rental property.

2. An online business - long and short-term savings - I'm sure you've seen a lot of ads and videos on the internet promoting ways to make money online, and for good reason. People are realising how important it has become to have multiple streams of income. I won't bother to highlight any particular online business idea, but I will suggest that this method of creating income could replace pension funds as the most reliable source of retirement income in the future. If another crisis arises, you might be able to survive without a government stimulus.

3. A self-directed, dividend stock portfolio - long term savings - This is a more risky way to save, but some who have used this method wisely started living off their dividend income before reaching fifty years old. Some online brokerages and even banks have recently reduced fees and commissions on their trading platforms. You can also download commission-free trading apps on your phone. The wealth of information and professional advice circulating on the internet allows you to make informed decisions about which dividend stocks to invest in, but you will need to research carefully.

4. Crowdfunded real estate investing - short term savings - instead of putting your money in a savings account, you could put it into accounts that allow real estate investors to borrow from it and pay you interest. Some local real estate brokers offer this service. Investment companies that specialize in real estate, like Fundscraper Capital Inc., offer this service to qualified investors. When you invest in crowdfunded real estate, you can put that interest aside for a rainy day, or for the next economic crisis.

5. A dividend-paying whole life insurance policy - long and short-term savings -This method allows you to save your money and spend it at the same time. You can borrow from the equity, or cash value, in the insurance policy to fund the assets mentioned above. While you use the insurance company's money to fund your assets, the money that you put in remains untouched, growing in value. When you've funded an insurance policy long enough, you can use it as collateral to get a loan from a bank to invest in rental real estate. This method won't necessarily work with just any whole life policy. These types of policies are specially designed so consult with a professional before getting started. You can find out more here.

We’ve made it through six months of the pandemic of the century. Many of us are left shaking our heads, wondering what happened to the year 2020. Some of us have lost loved ones. Others have lost jobs and businesses. We've had to cancel vacation plans and many of us have scarcely been able to see the parents and grandparents we hold so dear. Although our COVID-19 cases are much lower than they were in March, the threat of a second wave looms over us. As the federal and provincial governments scramble to prepare for the unknown, I can't help but wonder, is it safe to depend on the government to prepare us for the next crisis? Will we depend on the government to hand out stimulus cheques or will we proactively plan as if we know another crisis will come? Whether it be a second wave of the virus or something totally new, Canadians need to be financially prepared for it. If we learn to watch the economic trends and find a new way to save money, then we can be ready for the next crisis.