Time and cash can be in short supply during the demanding years of med school and residency. When it comes to money, you may find it hard enough just to stay ahead of expenses. So how do you plan for personal goals?
You can start one simple money habit right now, one that will carry you through your medical career: set up an automatic savings plan.
No amount is too small to start saving
If you’ve ever reached into a coat pocket and discovered a $20 bill, you know the buzz of “found" money—you saved it, without even trying.
That’s the same idea behind a pre-authorized contribution plan. A small amount goes into your savings “pocket” each month, without you even thinking about it. Yet it’s a strategy guaranteed to help you sock away substantial dollars over time, as savings accumulate and grow.
Three reasons to start pre-authorized contributions now
You may have heard of this method by other names: direct deposits, pre-authorized deposits or automatic transfers. By any name, a pre-authorized contribution plan automatically transfers a pre-specified amount of money from your regular bank account into a savings account or an investment account on a regular basis. Here are a few reasons to get started:
1. It’s a painless way to put money aside. It’s automatic, convenient, and you may never even notice the small amount diverted into your long-term savings. It could be the cost of a few lattes each month.
2. It can be a profitable way to invest. By continually investing at regular intervals, you benefit from compounding returns. You can direct your contributions into the investment vehicle of your choice, like a registered retirement savings plan or a tax-free savings account, one of the most advantageous ways to grow your money.
3. The sooner you start, the better. You can set up automatic savings at any age, but this is an especially good habit to establish early in your career. The younger you are when you set up a contribution plan, the more years you have for interest and investment returns to compound.
Plug a few numbers into our compound growth calculator and see for yourself. Plus, as you begin earning more money, you can easily increase the amount you put aside each month.
Get a financial head start on a successful medical career
MD Financial Management has been providing specialized financial planning advice to Canadian doctors for nearly 50 years. We understand how, as a physician, you’ll face different financial needs at each stage of your career, from your intense (and expensive) years in residency to establishing a practice or focusing on research.
Your MD Advisor can help you set up a pre-authorized contribution plan to suit your situation, starting with whatever small amount you’re able to save weekly or monthly right now.
Pick up smart money ideas on our Invested MD website—made simple for savings and wealth management strategies to last a lifetime. And visit MD ExO® Direct to learn about low-cost digital investing with advice when you need it.