6 ways, you as a Payroll professional can help your employees think about saving for Year-End All Year-Round
As Year-End approaches, it is a great time to help employees start thinking about how they can either start saving, or save better. Helping your employees understand “But why save in the first place?” is a great way for you to provide them with a secure future. Whether it is a down payment on a new home, a rainy day fund, or saving for retirement, here are 6 tips we have put together so employees can learn the essence of paying yourself first.
Contribute Regularly to an RRSP
By making regular RRSP contributions, employees get tax advantages such as tax-deductible contributions, tax-sheltered earnings, and tax deferrals. A benefit that’s being offered at more organizations is an employer matching RRSP, where your employer will match the contributions you make (up to a certain percentage) into a company owned plan.
Although Sherry takes in a little bit more pay, she’s not taking into consideration of how she could be paying herself back when it comes to tax time or retirement– you can see how much more tax she pays to the government.
Pay Yourself First Day
Sherry has contributed to her RRSP and pays less tax. Her RRSP contribution is considered a taxable benefit, and she’s also paid towards her future so that she may be in a better position to retire down the road.
For more information, here are two resources that explain the tax advantages of making regular contributions to RRSP:
Don’t just spend that Year-End bonus on yourself, Pay Yourself First!
In 2016, over 5.9 million Canadian taxpayers contributed to an RRSP, and if you’re one of them, then that’s even better news for you when it comes to Bonus time. Work with your employer to get that bonus right into an RRSP instead of right into your chequing account. If you’re already enrolled in a company owned RRSP, sometimes it’s almost as simple as emailing the proper authority and saying, ‘Make it so, move that bonus into an RRSP’.
Saving never felt so easy, and tax free!
By having that bonus go right into an RRSP, income tax is not deducted from the total amount, that means the entire bonus gets invested. Of course, you can always choose to either invest your entire bonus, or only a portion of it into RRSP.
Now you’re starting to see the benefits of paying yourself first, but it can be difficult to remember to pay yourself first every pay day. That is why employees should take advantage of automating savings. With a little work up front, you can easily put your savings on auto-pilot.
By choosing direct-depositing contributions, you no longer have to worry about it each month and it won’t get pushed aside.
Did you know you can ask your employer’s Payroll team to deduct a certain amount from your pay and automatically put it in your RRSP?
You can also set up automatic transfers with your financial institution, either online or at your local branch.
Round-Up Your Savings
We’re well in the age of digital wallets and mobile pay, did you know that your phone can also help you save?! Here are a few different Canadian mobile apps and financial institutions that make it easy to round up and save that spare change when buying something.