When it comes to your finances, it’s easy to want to only worry about the bare minimum. You pay your bills, you save a little… what more is there to worry about? I’ve definitely been guilty of this — I don’t make a ton, so I’ve always felt like the worlds of investing, stocks, and wealth management were far beyond my scope. Turns out, that’s where I’m wrong.
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To better show you what Wealthsimple can do for your money and your future, five real women were chosen to anonymously share the details of their own financial situations — and the experts at Wealthsimple analyzed each situation and responded with a plan of action (just like they’d do for you!).
Read on to see what kinds of investing opportunities are available to women at five different financial life stages — then head to Wealthsimple to get your first $10,000 invested for free.
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Age: 22
Annual Income/Where does your income come from: $30,000 hourly wage
Do you have previous experience investing in stocks, bonds, mutual funds, or other securities? Which types of investments have you purchased in the past? I mostly just use the Acorns app
Approximate value of your savings and investment accounts (does not include assets like property): $3,500
How long have you been in the stock market? 3-4 years
Value of property and other assets you own (home, car, other valuables): $5,000
Value of your debts (mortgages you owe, amount owed on leases or credit cards, etc.): $50,000
How much are you comfortable saving per month (a general rule is 20%): Not sure, I don’t have a set amount
Why are you investing (Pick a goal or two: Make a big purchase, retirement, children’s education, building a nest egg for the future)? Make a big purchase
What is the timeline for your goals? Next summer
What would you do if your investment portfolio lost 10% of its value during a global market decline (buy more, hold your investments, sell your investments)? Hold
How long do you plan to hold your investments in the markets (short < 3 years, medium 3-8 years, long 8+ years)? Short
Would you prefer to invest only in socially responsible investments (SRI)? No
Is this person in a position to invest?
Not yet.
If they’re not ready yet, what steps should they be taking before getting into investing, etc.?
There are four main priorities that I see in this particular situation. In order of importance, you should be looking at setting up an emergency fund, addressing your level of debt, saving for retirement, and then saving for a downpayment on a home (which I am assuming is the big purchase you mention!).
- First, you will want to set aside 3-6 months of living expenses in an emergency fund. The $3,500 may cover (or at least be a good start) towards this important step. A high interest savings account (like a Wealthsimple Smart Savings account!) where the funds are easily accessible and not exposed to any level of risk is a great place to store your emergency fund.
- After your emergency fund is established, the next step is to pay off your debts. It is also important to start thinking about a long-term retirement fund, but if your debts carry high interest costs (ie: credit cards, student loans, etc.), then these should be tackled first.
- Once these are paid off, it is important to establish a retirement savings strategy of $3,000-$6,000 annually (10%-20% of your earnings), as soon as you can! The first and most important rule of investing is to start early to take advantage of the power of compounding.
- Lastly, any savings for a home downpayment should be made after your retirement amount (10-20%) has been set aside for the year. You should also keep this savings goal in mind when determining the level of mortgage you can afford.
Additional Questions WS PMs Would Ask
- Tell me more about the assets and debts that you mentioned so we can assess the value/interest fees you’re currently paying.
- Does your employer have a 401(k) or GRSP plan? If so, make sure you’re contributing at least up to the company matching amount — AKA free money!
- Also note, we have launched our own Roundup feature — an easy way to start saving a little bit more and see all your money and investments in one place.
Age: 23
Annual Income/Where does your income come from: $45,000 salary
Do you have previous experience investing in stocks, bonds, mutual funds, or other securities? Which types of investments have you purchased in the past? Simple IRA
Approximate value of your savings and investment accounts (does not include assets like property): $600
How long have you been in the stock market? <1 year
Value of property and other assets you own (home, car, other valuables): Not sure
Value of your debts (mortgages you owe, amount owed on leases or credit cards, etc.): Around $60,000
How much are you comfortable saving per month (a general rule is 20%): 10%
Why are you investing (Pick a goal or two: Make a big purchase, retirement, children’s education, building a nest egg for the future)? Retirement, emergencies
What is the timeline for your goals? Student loans paid off sooner than 15 years
What would you do if your investment portfolio lost 10% of its value during a global market decline (buy more, hold your investments, sell your investments)? Hold
How long do you plan to hold your investments in the markets (short < 3 years, medium 3-8 years, long 8+ years)? Medium
Would you prefer to invest only in socially responsible investments (SRI)? Yes
Is this person in a position to invest?
Not yet.
If they’re not ready, what steps should they take first before getting into investing, etc.?
There are three main priorities here. In order of importance, you should be looking at setting up an emergency fund, paying off your debt, and saving for retirement.
- First, you will want to set aside 3-6 months of living expenses in an emergency fund. A high interest savings account (like Wealthsimple Smart Savings!) where the funds are easily accessible and not exposed to any level of risk is a great place to keep this money.
- After the emergency fund is established, you will need to tackle your high interest debts first (ie: credit cards, loans).
- Once these are paid off (yay!), you should focus on setting a retirement savings strategy of $4,500-$9,000 annually (10%-20% of your earnings) as soon as possible! The first and most important rule of investing is to start early to take advantage of the power of compounding.
Additional Questions WS PMs Would Ask
- Tell me more about the assets and debts that you mentioned so we can dig deeper into the fees that you’re paying and the value of your assets over time.
- Does your employer have a 401(k) or GRSP plan? If so, make sure you’re contributing at least up to the company matching amount, — free money!
Age: 28
Annual Income/Where does your income come from: $45,000 salary
Do you have previous experience investing in stocks, bonds, mutual funds, or other securities? Which types of investments have you purchased in the past? Invested in GIC and RRSPs
Approximate value of your savings and investment accounts (does not include assets like property): $35,000
How long have you been in the stock market? 8 years
Value of property and other assets you own (home, car, other valuables): $614,000
Value of your debts (mortgages you owe, amount owed on leases or credit cards, etc.): $423,000
How much are you comfortable saving per month (a general rule is 20%): 10%
Why are you investing (Pick a goal or two: Make a big purchase, retirement, children’s education, building a nest egg for the future)? Retirement
What is the timeline for your goals? 25 years
What would you do if your investment portfolio lost 10% of its value during a global market decline (buy more, hold your investments, sell your investments)? Hold
How long do you plan to hold your investments in the markets (short < 3 years, medium 3-8 years, long 8+ years)? Long
Would you prefer to invest only in socially responsible investments (SRI)? No
Is this person in a position to invest?
Yes, they already have investments in RRSPs and GICs — so they’ve already started! In addition to your long term investments, we also recommend 3-6 months of expenses held in a cash-based emergency fund (like a Smart Savings account!). If an emergency fund isn’t part of the $35,000 of existing savings, I’d recommend opening a savings account for this specific purpose before making additional long term investments.
How much?
10% of your income is our recommended comfortable amount to save/invest. This is a great start. If and when you can, increasing this to 15% would be an ideal goal!
How should they go about it?
- Build an emergency fund of 3-6 months expenses in a safe, cash-based account like a high interest savings account (Wealthsimple Smart Savings is a good option).
- Assuming the $614,000 represents your primary residence and that there are no other major purchases or large financial obligations on the horizon, I’d recommend putting long term investment savings (like for retirement) in a TFSA. That way you can save any RRSP contribution room for a future year when your salary exceeds $50,000 — you’ll get more out of the tax break that way.
Additional Questions WS PMs Would Ask
- What’s the split between how much is in your savings account vs. how much is invested in your RRSPs and GICs?
- What’s the breakdown of your debt? If the debt is good debt (like mortgage debt), this is less of an immediate concern. Other debts like credit cards, student loans etc. with high interest rates should be paid down before investing further.
- The timeline for the goal of retirement is stated as 25 years, and the current age is 28. For retirement to be a reality at age 53, savings would need to exceed the current level in order to achieve this goal. We would work through this together to put a plan in place or adjust your goals.
Age: 28
Annual Income/Where does your income come from: $88,000 salary
Do you have previous experience investing in stocks, bonds, mutual funds, or other securities? Which types of investments have you purchased in the past? No, only 401(k) through my employer
Approximate value of your savings and investment accounts (does not include assets like property): $38,000
How long have you been in the stock market? n/a
Value of property and other assets you own (home, car, other valuables): n/a
Value of your debts (mortgages you owe, amount owed on leases or credit cards, etc.): $0
How much are you comfortable saving per month (a general rule is 20%)? 15%
Why are you investing (Pick a goal or two: Make a big purchase, retirement, children’s education, building a nest egg for the future)? Retirement, Make a big purchase
What is the timeline for your goals? I’d love to own a place by the time I’m 30 (would love sooner but don’t think it’s realistic)
What would you do if your investment portfolio lost 10% of its value during a global market decline (buy more, hold your investments, sell your investments)? I’m honestly not sure, I’d think the smart move would be to hold?
How long do you plan to hold your investments in the markets (short < 3 years, medium 3-8 years, long 8+ years)? Long
Would you prefer to invest only in socially responsible investments (SRI)? Yes
Is this person in a position to invest?
Yes! She has no debt and at least 3-6 months of living expenses saved in an easily accessible savings account as an emergency fund so she’s ready to start investing.
How much?
Since you’re comfortable saving 15% of your income, this comes out to $1.1K per month.
How should they go about it?
- I recommend you balance savings between retirement accounts and taxable accounts that you can access anytime, for flexibility on your goal to purchase a home.
- Make sure you’re contributing at least up to the amount your company will match through your employer 401(k).
- Save the remaining 15% of your income ($1.1K m/o, $12,300 annual) and invest in a Balanced Socially Responsible Investing portfolio in a Personal account. With an average 5% rate of return, you will have approximately $76,585 after five years. This will allow a 20% downpayment on a house worth $382K. Note that there is market risk and potential portfolio fluctuations when investing, but this is what we recommend based on what we know about your situation so far!
If they’re not yet ready, what steps should they take first before getting into investing, etc.?
Since you haven’t invested outside of your 401(k), you can learn more about the investment funds, accounts and strategies to familiarize yourself with how this works. Wealthsimple has an Investing 101 section which is a great starting place to reading more about these areas, as well as our Magazine.
Additional Questions WS PMs Would Ask
- What percentage of your investments/cash lives in an easily accessible emergency fund?
Age: 28
Annual Income/Where does your income come from: Our gross annual income is $116,000. My salary is $38,000 and my husband’s salary is $78,000.
Do you have previous experience investing in stocks, bonds, mutual funds, or other securities? Which types of investments have you purchased in the past? No, but we have looked in to mutual funds to help save for future kids colleges.
Approximate value of your savings and investment accounts (does not include assets like property): ~$36,000
How long have you been in the stock market? n/a
Value of property and other assets you own (home, car, other valuables): $20,000
Value of your debts (mortgages you owe, amount owed on leases or credit cards, etc.): None
How much are you comfortable saving per month (a general rule is 20%)? We save $1,000 per month.
Why are you investing (Pick a goal or two: Make a big purchase, retirement, children’s education, building a nest egg for the future)? Make a big purchase, Retirement, Children’s education
What is the timeline for your goals? 5 years
What would you do if your investment portfolio lost 10% of its value during a global market decline (buy more, hold your investments, sell your investments)? Hold
How long do you plan to hold your investments in the markets (short < 3 years, medium 3-8 years, long 8+ years): Short
Would you prefer to invest only in socially responsible investments (SRI)? Yes
Is this person in a position to invest?
Yes. The $1,000 per month that is currently be saved should be directed to a short/medium term investment to provide the ability for you to make the major purchase and education savings for your kids. We’ve made some assumptions made here that the large purchase is a home, and that the kids are currently under the age of 10.
How much?
The current savings of $1,000 is a great start. If and when cash flow permits, increasing this to 15% of your salary would be a great goal.
How should they go about it?
- The three key savings objectives here are a home downpayment, the kids’ education, and retirement savings. The time frame for each of these objectives likely requires a different investment strategy.
- If your home purchase goal is at least five years out, the funds should be directed to a secure or conservative investment, depending on your comfort level with risk.
- An RRSP first time home buyers withdrawal could make sense if in Canada. If this is the case, RRSP contributions in the husband’s name would be a good idea for the home downpayment amount. In the US, you can withdraw $10K from an IRA without an early withdrawal penalty or take a loan from a group retirement plan like a 401(k).
- The kids’ education savings should be directed to a 529 plan if in the US, or an RESP plan if in Canada to take advantage of the benefits associated with these types of plans!
- Retirement savings should be invested in a long term strategy. We will work with you to put together a portfolio that addresses your risk tolerance and goal timelines.
Additional Questions WS PMs Would Ask
- For you savings/investments: what’s the split between how much is in your savings account vs how much is invested?
- There seems to be a bit of a discrepancy between the timeline for goals (five years) and how long do you plan to hold your investments in the market (three years) — let’s work through your specific goals together!
- Does your employer have a 401(k) or GRSP plan? If so, make sure you’re contributing at least up to the company matching amount — free money!
To see what investing options are available to you and your situation (and to invest your first $10,000 FREE!), head to Wealthsimple — there’s no time like the present to make the most of your money!!
This post is sponsored by Wealthsimple but all of the opinions within are those of The Everygirl editorial board.