How much is enough when it comes to investing on a monthly basis?
It’s a question many people often ask themselves, perhaps moreso during economically turbulent times. With an escalating trade war with the U.S. on Canadian’s minds, according to the Bank of Canada’s latest Canadian Survey of Consumer Expectations, many Canadians are financially preparing for negative change. “…Consumers now intend to spend more cautiously given the uncertainty around the trade conflict,” the report states.
Less spending could lead to more saving and investing, but how much should Canadians aim for? What’s a reasonable goal?
Getting more specific: Is $750 to $1,000 per month enough?
Begin looking at your financial goals and income
Investing isn’t done in a vacuum, separate from your overall financial goals. Before starting to invest, take stock of your financial goals. Are you saving for a house or a child’s education? Maybe thinking of building an emergency savings to prepare for an upcoming recession? Answering these questions will illuminate how much you can invest, and where, depending on your goals. If you’re investing for retirement for example, a common rule of thumb is to save 15% of your annual income.
According to the data from Statistics Canada, the average Canadian earns about $1,294.26 per week — that’s an annual salary of $67,301.52. Using the 15% rule, the average Canadian should be investing $776.56 per month into a retirement account. So, investing $750 to $1,000 each month for retirement is around average or better than average.
That said, these numbers are ideal figures. Sometimes, especially with a growing cost of living for many Canadians, these ideals can’t be met. A survey from TD Bank Group found that nearly half of Canadians (49%) foresee inflation and a rising cost of living as their biggest financial obstacles, and over half of those surveyed intend to cut their spending. Indeed, numerous Canadians report not being able to save during this economic climate.
It’s also important to keep your investing goals in step with your savings goals. For instance, it’s generally recommended to have an emergency savings (that is not invested) of around three-to-six months of expenses. The Government of Canada notes that most Canadians will spend around 35% to 50% of their income on housing expenses (e.g. rent, mortgage payments, utilities). Assuming your total expenses are around 50% of your monthly income — $2,588.52 per month — three months of expenses would be $7,765.56 and six months would be $15,531.12. Having a monetary cushion in place can help you not make investment decisions out of panic or fear, especially when the markets are in a downturn like they are now.
How should I start investing?
As the saying goes, it’s best to “pay yourself first.” When it comes to investing on a monthly basis, that means setting up automatic transfers to your investment accounts. The type of account you want to use for investing depends on your goals. Here’s a rough breakdown.
- Registered Retirement Savings Plan (RRSP): Contributions to this account are tax-deductible but withdrawals are taxed at a rate of 10%, 20% or 30% depending on the size of the withdrawal. Best for long-term goals so funds can be withdrawn when your income is lower.
- Tax Free Savings Account (TFSA): Money invested through a TFSA is not tax deductible, but is not taxed upon withdrawal and neither are any capital gains. Best for short-term or longer-term goals, though there is a contribution limit to be aware of.
- First Home Savings Account (FHSA): As the name suggests the FHSA is a registered account limited to first-time homebuyers and it comes with the perks of a TFSA and RRSP. Any funds deposited are tax deductible and any income generated or capital gains realized in the account are also not taxable. Note that these benefits only apply if the funds in the account are used to buy a home, so investments in this account are best for short-term to long-term housing goals.
- Non-registered Account: Any account that is not registered with the government is subject to income tax on interest or income produced as well as capital gains taxes. That said, there is no contribution limit. These accounts are best to use when your RRSP and TFSA are maxed, generally, as they don’t carry as many benefits.
Deciding on an investment vehicle is just one part of the picture, however. You also need to consider if you want to manage your investments yourself or have someone else handle your portfolio.
As you may have noticed, deciding how much to invest as a Canadian is just one part of a complex decision. If you’re just getting into investing, make sure to do your research. Check out our guide on Investing for Beginners to get started. Chatting with a licensed financial advisor can also shed light on how you should invest your funds given your overall financial picture.
Remember, investing isn’t a competition. It’s a tool to help you live a life you’re content with.
Sources
1. Bank of Canada: Canadian Survey of Consumer Expectations—First Quarter of 2025 (April 7, 2025)
2. Statistics Canada: Payroll employment, earnings and hours, and job vacancies, January 2025 (March 27, 2025)
3. TD Bank: Half of Canadians foresee inflation and the cost of living as biggest financial challenge in 2025, new TD survey (January 15, 2025)
4. Government of Canada: Prepare financially: Estimate how much it’ll cost you to live in Canada
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
