How can you know what saving and investment types are right for you? The first step is to identify and prioritize your saving and investing goals. Try to be as specific as possible, setting a dollar amount and a time frame.
To help you get started, fill out the My investing goals: Worksheet.
Note: You are generally better off paying down debt before investing. That's because the interest you pay on the money you owe is usually more than what you can earn by investing.
As your life circumstances change, so will your financial goals. And generally, as your goals change, you will need to review your saving and investing plan.
Your goals may be short-term (two years or less), medium-term (three to five years) or long-term (six years or more). The amount of time you have to achieve your goals can affect how you plan to save and invest. For example:
- If you are saving for an emergency fund or a major purchase within a year or two, your saving and investment timeline will be short-term. Your focus will probably be on building your savings and keeping them protected in an easily accessible savings account, short-term deposit or cashable savings bond.
- On the other hand, if you are putting money away for a long-term goal such as your retirement, for example 20 years from now, you may want to consider a broader range of investment types.
Many investments offer a higher rate of return but also involve some level of risk. In other words, you could earn more but you could also lose some of your money. However, the risk may be more acceptable if your goal is longer-term because you have more time to recover any financial losses.
Many people choose to work with a financial planner or advisor to help them establish their goals and develop a realistic plan for achieving them. See Working with a financial planner or advisor for more information.