A lot of us would like to save more money, but that’s often easier said than done. We often say that if only we got a raise at work, we’d save more money. The funny thing is, even when we do get a raise at work, instead of saving more money, most of us find new ways to spend it.
Why does this happen? Due to a little thing called “lifestyle inflation.” Lifestyle inflation is when you increase your spending when you get a raise at work. What are the side effects of lifestyle inflation? It makes it hard to pay off debt, save for retirement and contribute to your child’s RESP.
There is a misconception out there that we can’t afford to contribute to an RESP, but even if you’re able to save an extra $75 a month, it will add up over time when compounded with government grants. How do you do that without getting a raise? Let’s take a closer look at a little thing called the “latte factor.”
Introducing the Latte Factor
What’s the easiest way to find extra money to contribute to your child’s RESP? It’s not getting a raise at work. It’s making better use of the money you already have.
There’s a term out there you may have heard of called the Latte Factor or Latte Effect. At first glance, you might it has something to do with drinking a lot of lattes. While it could for some people, it’s more about how small daily purchases can really add up. However, when you eliminate them, you can end up with a nice chunk of change. It all comes down to finding an extra $3 per day in savings and investing it.
What does $3 per day mean to you? Saving an extra $3 per day means about $75 per month or $900 per year; not bad and that’s just by saving $3 a day. Imagine if you could save $10 a day or more. That’s when the savings can really add up!
How Do You Save More Money?
So, how do you save more money? That’s the million-dollar question, but saving money is easier than you thought.
Besides the mortgage/rent, for most families the second and third most costly household expenses are food and transportation. If you could shave five or 10 percent off those, the savings may add up to $50 or $100 extra per month.
For example, instead of driving to work and paying for parking every single day, why not bike to work once a week or take public transit. You don’t have to do it every single day, especially when you have to drop off the kids to school or have errands to run, but once in a while won’t kill you.
Likewise, instead of buying your lunch every single day, but cutting it back to two or three times a week, you could easily save yourself $50 or $100 extra a month. These are just a couple examples of how to save.
Your Child Deserves a Brighter Future
If you’re not contributing to your child’s RESP, you’re literally leaving free government money on the table. Small savings each day can add up to a lot over time and even more when invested in an RESP. By coming up with an extra $75 per month, you can take advantage of the RESP and provide your child with a bright future through the gift of higher education.