What is “saving?”

People are always telling me that they’re saving, and then when I ask what their goal is, they tell me it’s to buy a new car, go on a lovely vacation with the kids, or put in a new kitchen. Hey, that’s not “SAVING”… not in my book.



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If you’re accumulating money to spend – be it on a house, on a new motorcycle or on your sister’s birthday present – that’s planned spending. You’re planning to spend the money, right? How can that be “saving?”

Saving is what you do long-term to have money for another chapter of your life. You save for retirement so that come time to hang up your spurs, you’ve got some change in your pocket. You save for your kids’ future education so they don’t get buried in debt to get an education. You save an emergency fund. None of these “savings” are with an eye to getting stuff or having wonderful experiences. They are all done with an eye to providing an income if a time comes when you won’t have an income, or to produce an income.

The biggest contributor to the misinformation about “saving” is the naming of the “savings account.” A savings account isn’t a vehicle to save — although that’s how it’s sold. It’s actually an investment; it produces a return in the form of interest, has a very high level of liquidity so you can get at your money whenever you want to, and a very low level of risk, particularly if you’re savings account comes with CDIC (Canada Deposit Insurance Corporation) coverage.

If we stop looking at savings accounts as simply vehicles for saving (which an RRSP, TFSA and RESP all are), and start looking at them as investments, which they rightfully are, then maybe our standards will go up a little and we won’t be quite so willing to settle for the pittance often offered in interest. Why would you settle for an investment paying 0.25% when a very similar investment is paying 2%? Shift your thinking and you’ll make more money because you won’t be willing to settle for rip-off rates just because you’ve been convinced that you’re “saving.”

25 comments on “What is “saving?”

  1. Does paying off your mortgage early count as 'saving'? We are new homeowners and trying to pay down our mortgage as fast as we can, doubling up payments and issuing pre-payments where possible. 10% of my salary is automatically being saved through an ESAP plan, and we will begin slowly repaying the loans we took from our RSPs. But is that enough? Should we be saving more, and perhaps not trying to pay off the mortgage so quickly?


    • Yes it certainly does count as 'savings' since the sheer act of making mortgage payments is a forced act of saving. You may want to ensure that you have a 8 month emergency fund just in case of an unexpected life event.


  2. @Ashley: Im not an expert but from everything Ive read on these blogs over the last few years and from what Ive learned personally and as business owner/ consultant is there is no blanket answer. Look at the interest rate you are paying on your mortgage and compare to the avg return you are making on investments. Be sure to take into account after tax value on your mortgage pyts. We've used advice from reading independent financial blogs as well from those we know who are VERY financially secure and better off now than ever. Here's one thing I can tell you that kept coming back…always leave enough money to enjoy your life as you go. Hope this helps.


  3. I understand what you are saying Gail. Ok let me use different terminology. I am "putting aside" money, "collecting", however you want to call it, to eventually buy a car (when I have the whole amount "collected" ofcourse. I wont use the word "saving" for "stuff" I am buying, anymore. Hey, so what do you call that "stuff" you spend money on in retirement, with money that you "saved"? Gets a little confusing, doesnt it. Terminology aside, the important things are, pay yourself first, "save" for emergencies, "save" for retirement, live within your means, then "put money aside" for the other "stuff" when all the other things are in place.


  4. I want to understand some basic options available for investments, where I can maximise my returns. Are GIC accounts giving more returns than savings account or there are other options also.


    • Hi Anil…there are so many options available…but what suits you depends on your circumstance and when you require the money…short term and long term. The best option would be consult a qualified financial consultant.


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  22. Great article. The concept of saving is usually misunderstood, and the name "savings account" is usually misused.


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