The financial wisdom I wish I had at 22

Don’t let the bank make more from your money than you do

Common Wealth Retirement
Feb 9 · 4 min read

By Ben Carpenter
Director of Talent Acquisition, Common Wealth Retirement

What wisdom, you ask? The foresight to save a little money each month in a way that didn’t (noticeably) cost me anything, when I was busy living life as a carefree millennial. Life happens fast, and I wish someone had explained how to invest my money, to make more of it — and prevent the bank from taking half of it.

Hindsight Is 20/20

During my first job in telesales back in 2002, I was introduced to my first group RRSP (Registered Retirement Savings Plan). The agent from the bank came in with a presentation of financial jargon and enough paperwork to turn me off. The plan offered a 2% employer match and payroll deductions. Frankly, I had no interest at that time because I was more concerned with spending my pay on the things 22-year-olds care about. It was all about work hard, play hard.

Several of my peers signed up right away, and I should have followed suit. It was only after my friend’s parents explained how beneficial it was that I relinquished a few dollars from my paycheck each month.

Almost twenty years later, knowing how rare workplace matching is, I wish I could tell my 22-year-old self to forego the stuff I once thought was important but is worthless today. In the end, my contributions resulted in a group RSSP worth about $5,000 as I exited that job. Today, that account is only worth about $8,800. It could have done better.

Wise Moves

Fast forward a decade and three employers later, I found my way to my second group RRSP. This one had a better match, I was 32 with a better salary, and expecting my first child — so saving for the future was at the top of my priority list. This is when I learned about saving in a low-fee target date fund and the power of employer matching. Within eight years I accumulated a pretty good nest egg. Naturally, learning more about investing made me reflect on why my first group RRSP performed so much worse.

The Great Rip-Off

Let’s jump back and dissect this $8,800 account that I have.

Investing at the bank
My first group RRSP was worth $5,000. After 18 years in a mutual fund that had a 5% return and an annual fee of 1.78%, I ended up with a mere $8,845. The bank came out the winner.

Using Larry Bates’ T-REX Calculator, we can start to visualize how my bank investment worked for me. The above shows that my $5k in savings (yellow line) made the bank about as much in fees (orange line) than I earned in total gain. I was in disbelief when I finally did the math and realized the bank took a near-even split. How is that right? Does this happen to everyone? I think the bank (whom I am still with) did pretty well. I can’t say I’m stoked about splitting $7k in gains, but it does highlight that we deserve better. A lot better. Today, at 39 years old, it bothers me that no one from my bank has ever asked me about my investment, but they don’t miss a chance to increase my credit limit…

Don’t Let Bad Rates Happen to You

Anyway, let’s make sure this doesn’t happen to others by taking a look at what could have happened with that $5k. This time I’m using the Common Good Plan.

Investing in the Common Good Plan
If I had invested my $5,000 in the Common Good Plan for 18 years, I would have made $13,585.

In this example, I am still the yellow line, but I keep 83% of my investment earnings — as opposed to the 55% I kept with the bank. I take solace that my experience can help others achieve a better outcome.

The Great Rollover

You might be asking yourself what happened with my second (and larger) group RSSP? That is its own story, and we wrote about it here. Let’s just say saving for retirement is a minefield of “gotchas” if you don’t know what to look for. The good news is I moved my account to the Common Good Plan as quickly as possible — where I know my financial wellness, not shareholder profits, is the key priority. In my experience, group retirement plans from insurance companies and banks are simply another product to make them money. They never demonstrated that my interest or success mattered at all.

Learn from my mistake and share this with a friend. Investing in the right place means ‘cash in your pants’. Your friends, family and future you will thank you.

Common Wealth

Save more. Retire happy.

Common Wealth

Common Wealth delivers Canada’s first digital retirement plan for life. We make it easy to plan, save and build a reliable retirement income — so you can rest easy.

Common Wealth Retirement

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Fast-growing, mission-driven fintech company aimed at helping Canadians of all income levels achieve a financially secure retirement

Common Wealth

Common Wealth delivers Canada’s first digital retirement plan for life. We make it easy to plan, save and build a reliable retirement income — so you can rest easy.