Congratulations, you’ve purchased your home! It’s an exciting time, a fresh start, and one step closer to your best financial future. It also changes your finances quite substantially. Buying a home is a good time to evaluate your savings strategies so you’re prepared no matter what comes your way.
Re-evaluate your rainy day fund
If the cost of paying your mortgage (and the tax and insurance bills that come with it) increases your monthly living expenses, it’s time to reconsider how much to put into your emergency fund each month. Chances are your monthly expenses have changed, which means you’ll want to increase your savings accordingly. Work toward saving at least three to six months’ worth of income in your rainy day fund1.
Save for tax time
Your property tax bill is a large annual expense, and most often people set aside money every month to ensure they are ready come tax time. One great way to save is to open a high-interest savings account, and then automatically set aside 1/12 of your total tax bill each month. You can save without even thinking about it, and when it comes time to pay you’ll enjoy the extra savings that comes from the interest you’ve earned.
Keep a dedicated home maintenance savings account
Maintenance costs vary a great deal year-over-year. Sometimes you’ll just need a few minor repairs, other times you’ll be hit with major expenses. Unfortunately, there’s often no way to predict this. Saving anywhere from one to three percent2 of your home’s value annually in a separate maintenance fund can help you when you are caught with an unexpected bill.
Save Smarter, Not Harder
As you can imagine, all of this saving will lead to a larger sum of money in your accounts. Make that money work for you by choosing a high-interest savings account! Saving for your property taxes in a Regular Savings account may work best, since you’ll have the flexibility to withdraw anytime and don’t have to worry about affecting your annual contribution limits (as you would when withdrawing from a TFSA). Similarly, larger and longer term savings such as your maintenance fund and emergency savings might be better suited to a TFSA, where your money can grow tax-free until you need it.
Everyone’s saving situation is unique – and there are many strategies that work for different circumstances. The advice in this article is meant to provide general information only, and does not constitute financial, accounting, tax, legal, or other professional advice. We encourage you to seek personalized advice from qualified professionals regarding your unique savings needs and goals.
1 Source: https://www.canada.ca/en/financial-consumer-agency/services/savings-investments/setting-up-emergency-funds.html
2 Source: https://www.hgtv.com/design/real-estate/how-to-budget-for-home-maintenance-costs