The federal government of Canada ended interest accrual on Canada Student Loans, effective April 1, 2023, but you must still pay any interest accrued before then. Some provinces and territories—Alberta, Saskatchewan, Ontario, Quebec, Nunavut and the Northwest Territories—charge interest on their portion of student loans. The interest rate varies, but is usually a prime rate and a percentage. Ontario, for example, calculates interest at the principal rate (currently 7.2%) and 1%.
2. Build an emergency fund
If your credit card debt is gone and you're on your way to paying off your student loans, next on the agenda should be building an emergency fund, which should cover at least three months of living expenses. This will help in situations such as layoffs, car breakdowns, sudden illness that prevents you from working, and more.
You have several options for where to stash your money, including registered accounts, but in an emergency, you'll probably want quick and easy access to your money. A high-interest savings account (HISA) pays much more interest than a regular checking bank savings account, and you can withdraw the money at any time.
3. Set goals—and plan savings plans to support them
Once you have a solid debt repayment plan and emergency fund in place, you can set aside some money to meet your future financial goals. Maybe you're adopting a pet, or you're starting a startup and need start-up costs. Maybe you intend to take a big trip or buy a car in the next few years. An automatic savings plan—which transfers a set amount to a specific savings account—can help you achieve this quickly. At CIBC, for example, you can set up AutoSave on your bank account to transfer a set amount—say, $100—to a specific savings account each time your check is deposited. (This is what financial experts call “pay yourself first”!)
Your monthly contributions may be as little as $20 a week or as high as $100 or more, but the bottom line is that they will add up over time. You want to maximize the interest you get from it. Remember that compound interest information above? It works in a straightforward way, too. You can earn interest on your savings. Check out our compound interest calculator—it might blow your mind to see how savings can add up over 30 years. (Your parents and your future financial advisor will be impressed, too.)
Also, a HISA is a great option that pays more interest than a regular bank account. Currently, you can find HISAs with interest rates of 2.5% to 5.25%, which may include limited-time offers* that pay extra interest for several months to a year. Although these rates can change, using a HISA can be an excellent tool for building wealth in the short term. And if the HISA is held in a TFSA, all the investment income you earn is tax-free.
Grow your savings with a special interest rate when you open your first CIBC eAdvantage Savings account. Restrictions apply.
4. Choose your financial advice carefully
Parents and friends all have their own ideas about the best way to save—especially if they've successfully bought a house or made a lot of money investing in the stock market. While some of their tips may work, it's true, their advice may not apply to your unique financial situation.
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