How to Save Your First $10,000 in Canada (Without Feeling Overwhelmed)

Why $10,000 Is the Most Important Financial Milestone

$10,000 isn’t a lot of money. But most Canadians will never save it. And the reason has nothing to do with income, expenses, or the economy. It has everything to do with one thing: proving to yourself that you actually can.

To be honest, your wealth really starts to accelerate once you approach $100K. This is when compounding starts to work meaningfully in your favour. But, $10K is the most important financial milestone because it represents a crucial psychological shift in how you see money. It proves you can build wealth.

The same strategy that gets you to $10K will get you to $100K, and eventually to $1 million. The process is simple:

• Spend less than you make

• Save and invest the difference

When you reach your first $10K you prove to yourself that you have built the habit of saving consistently. To achieve this you had to delay gratification rather than give in to short term desires (Ex. frequently buying designer clothes). Maybe you implemented the pay yourself first strategy, or followed a strict budget. Either way, you had to follow a system long enough for it to work. As James Clear puts it we don’t rise to the level of our goals, we fall to the level of our systems. By saving your first $10K you build the habits that are necessary for long term wealth accumulation.

When running a marathon, a common psychological recommendation is to focus on the next kilometre. If you just get there, then you can focus on the next one, and so on. By focusing on the full 42.2 kilometres from the start, the objective quickly feels unmanageable, especially when times get tough. Saving and investing are the same. You need to set proverbial “mile markers” on the path to your long term financial goals. Your first $10K is one of those crucial mile markers. Once you reach it, you build the confidence and momentum to go for the next one. That’s how you finish a marathon, and that’s how you build true long term wealth.

What “Saving $10,000” Actually Means

Your first $10K is an important milestone on the path to building wealth. However, you have to be clear about what actually counts toward it. If you have $100K in high interest credit card debt but $10K saved, then this isn’t the same as being financially ahead. If you remember from our previous article here, one of the early steps in the Canadian Financial Order of Operations is paying off high interest debt. This should be prioritized before aggressively investing.

On the other side of the coin, you also don’t need to be overly strict with the definition. It should be calculated based on your net savings across all relevant accounts.

Saving your first $10K doesn’t mean that you just have the cash sitting idle in a bank account collecting dust. At the same time, not every dollar needs to be invested in the stock market. Instead the balance of all of the following accounts should be counted towards your first $10K:

• Emergency Fund

• Short-term Savings

• Long term investments

Step 1: Decide What Your First $10K Is For

Before you actually save your first $10K its important to get clear on why you’re saving the money in the first place. You have to know your “why”. Without a strong why, you’re more susceptible to giving into life's temptations. Your why is what keeps you consistent and brings you back on track when you stray.

Some common reasons people aim to save their first $10K include:

• Build an emergency fund

• Save for a house downpayment

• Reach an investing milestone

• Buy a car

• Save for a vacation

These goals make saving your first $10K feel more tangible. However, on their own, they still aren’t clear enough. The next step is attaching each goal to something meaningful.

Example 1: I want to save $10K to purchase a car so I can reduce my daily commute by one hour. This will give me more free time to play pickleball with friends and reduce my stress from spending less time commuting.

Example 2: I want to invest $10K now because I know it will grow to $1 million in retirement. This will allow my wife and I to travel to a new country every year in retirement.

When you define the goal by adding a clear why, it goes beyond money just sitting in a bank account. It forces you to think more deeply about how you spend your money.

Step 2: Set a Realistic Timeline (Without Guesswork)

Once you have defined your why for saving $10K, the next step is setting a realistic timeline. In his bestselling book The 7 Habits of Highly Effective People, Stephen Covey wrote a chapter titled “Begin with the End in Mind”. You first have to define an end date for your goal. From there, you plan backward from that date. Not the other way around.

Example: I want to save $10K to pay for a vacation with my wife in 24 months. This means that I need to save about $417 per month until that date.

By planning with the end in mind, it forces you to be more realistic about the timeline. If the monthly savings amount required to meet your goal date feels unrealistic then you know you have two options:

• Extend the timeline to lower the monthly savings amount required.

• Cut costs elsewhere to increase your monthly savings amount.

Step 3: Automate the Entire Process

Once you have identified your goal and set a clear timeline the next step is to simplify the process. The way you are going to do this is to set up an automation flow. This automates the savings process without requiring you to make monthly decisions.

The standard approach to savings your first $10K involves receiving your paycheque, manually transferring the money to savings, and then manually investing it. Each manual step adds extra friction, making it easier for you to skip or delay saving altogether.

Instead, the solution is to set up pre-authorized recurring transfers from your chequing account to your savings account for the day after you get paid. Once that’s in place, set up automatic contributions to your investment account. Automation removes the need for motivation, and allows discipline to happen without any ongoing effort.

It is important that you follow the “pay yourself first” strategy. This means that the first “payment” you make after receiving your paycheque goes directly to your savings. After that, you can allocate the remaining money the way you feel necessary. This strategy beats budgeting for beginners because it prioritizes saving first, while still allowing flexibility with the remaining money. If you want a more in-depth explanation of this we wrote about it in our last article here.

Step 4: Choose the Right Accounts (Don’t Overthink This)

At this point, you might be wondering which account you should actually use to save this money. The short answer is a Tax Free Savings Account (TFSA). Our preferred option would be through a low-cost discount brokerage firm such as Questrade or Wealthsimple. Provided you are 19 or older, you should already have enough TFSA contribution room to deposit up to $10K without triggering any taxes.

Why the TFSA?

The TFSA is generally preferred over both a Non-Registered Account and Registered Retirement Savings Account (RRSP) at this stage because:

• You don’t pay taxes on any interest, capital gain or dividends earned inside the account.

• You have flexibility to withdraw money at any time without tax implications.

Also, if you are saving your first $10K, there’s a good chance you are either early in your career, or are earning a modest income. RRSP’s are generally most effective for higher income earners who benefit from deferring taxes until retirement. If you aren’t in this category, the RRSP is often not the best starting point.

Why a Discount Brokerage Firm?

There are three reasons we prefer discount brokerage firms over a traditional bank. These include:

• Low fees

• Flexibility in investment options

• High potential returns on savings

High fees and low interest rate on cash seems like a minor inconvenience. However, they have the potential to significantly erode long term returns. It is for this reason that we try to eliminate, or reduce them as much as possible.

Exceptions to the Rule: Saving for a Home or High Earner

Although we prefer the TFSA for saving your first $10K there are two obvious exceptions to the rule.

1. If you plan on using this $10K towards purchasing your first home than use the First Home Savings Account (FHSA). This account is better than the TFSA for this purpose, and it isn’t even close.

2. If you are a high income earner, and investing for the long-term than the RRSP may be your preferred choice.

However, it is important to note that no option is bad. The point is to start, get momentum, and refine your strategy over time.

Step 5: Increase Savings Without Tracking Every Dollar

After you start saving and see your net worth grow, there’s a natural temptation to want to save more. A common recommendation among personal finance experts is that you need to ruthlessly cut expenses in order to do so. The idea is that by creating an aggressive budget, often at the expense of life's pleasures, you can increase your savings. This is based on a simple equation:

Savings = Income - Expenses

However, this strategy fails for many people. The reason why it fails is because it often focuses on reducing your variable costs (ie. entertainment, clothing, activities, food delivery). In reality, these costs often make up only a small portion of peoples everyday expenses. Instead, most of the average Canadian’s income is spent on fixed costs (ie. rent, transportation, insurance, utilities). The unfortunate part is that fixed costs are much harder to change. Although pithy statements like “Your $4 flat white every morning is costing you $1,000 every year” sound cool. It’s the equivalent of stepping over dollars to pick up pennies.

The lesson here is that if you’re serious about saving your first $10K, you need to focus on large, recurring expenses. By modifying these types of expenses you create a much larger savings gap than any minor cost ever will.

• Example 1: Instead of renting a studio in a new condo building for $2,500 per month, find a room in a house for $1,000 per month or less.

• Example 2: Instead of buying a brand new car with a $800 per month payment, pick up a used Toyota with a payment of $300 to $400 per month or less.

Income Lever

The restrictive mentality of cutting small expenses also ignores an entire component of our savings equation: Income. If you think about it, there’s a hard cap on how much you can actually save, even in the most frugal of situations. Meanwhile, there isn’t an upper bound on how much you can make. The only constraint is your ability to create the opportunity for yourself. Because of this, when possible, increasing your income is often more effective than cutting expenses. This can be completed through one or a few different strategies:

• Ask for a raise

• Pick up more shifts, or take on more clients

• Switch jobs to a better paying position or employer

• Get a second job on off hours

• Start a side gig, or business

The trick is that you want to make sure that you avoid inflating your lifestyle when you start to make more money. This is often termed “lifestyle creep”. A good rule of thumb is to direct 50% of any raise toward savings, and allow the other 50% to improve your lifestyle.

What Usually Derails the First $10K (And How to Avoid It)

The path to saving your first $10K is actually quite simple with consistent discipline. However, not everyone is able to get ahead in life and many end up living paycheque to paycheque. These people fall victim to the following pitfalls:

• They are inconsistent, saving a lot one month, and then nothing for a few months.

• They fall off the wagon, missing a month of savings, and they don’t get back on.

• They chase returns, and are poor investors so they light the money on fire.

• They expect perfection and for the conditions to be right so they never start saving.

To avoid these mistakes you need to:

• Start with a very small savings amount, even $10, and increase gradually over time.

• Follow the rule of never miss twice. Never miss two months of savings in a row. If you

  miss one month, that’s ok. But you need to get back on the right track.

• Stick to conservative, time tested investments. If your goals are short term then invest in Guaranteed Interest Certificates (GIC’s), high quality bonds, money market funds, or hold it in a High Interest Savings Account (HISA). If your goals are long term then buy an index ETF. Avoid individual stocks, cryptocurrency or other risky assets until you have money to burn.

• Except that conditions will never be perfect, you just have to start. As the chinese proverb goes, “The best time to plant a tree was 20 years ago. The second best time is now.”

What Changes After You Hit $10,000

I’ll never forget the day my I finally reached $10,000 in savings. I was parked in a lot between client meetings when I pulled up Wealthsimple on my phone. Just checking my TFSA like I always did. The VEQT balance loaded: $10,006. I sat there staring at it for way longer than I should have. A year earlier, I was making minimum wage and scraping together $20 to $50 a month if I was lucky. Now I had five figures invested. I felt rich. I wasn’t, obviously. But that number made me feel like I’d cracked some code that used to feel impossible.

The thing is, I’d just started earning more. I knew I could ramp this up. Seeing that $10K made me realize the next $10K wouldn’t take nearly as long. And I was right. It didn’t.

Your second $10K takes about half the time. You’re not figuring things out anymore. You already know which expenses to cut. You already know how to increase your income. You already have the automation running. You’re just executing a system you’ve proven works. That confidence compounds faster than the money does.

That’s why the first $10K matters so much. It’s not really about having ten thousand dollars. It’s about believing you can build wealth. Once you hit that number, you’ve got the discipline, the habits, the confidence. Everything you need to get to $100K and beyond. Same playbook. Just more reps.

From here, you stop worrying about whether you can save and start thinking about how to optimize. This is when you select better accounts, and make more specific investment decisions. But none of that works without the foundation. Your first $10K is the foundation.

You Don’t Need a Perfect Plan — You Need a Working One

At this point, you might still feel overwhelmed. Maybe you’re thinking about all the variables: Which account should I really use? What if I pick the wrong investments? What if I don’t save enough each month? What if something comes up and I have to stop?

The truth is none of those questions matter as much as you think. The difference between people who hit $10K, and people who don’t has nothing to do with having all the answers. It’s just about starting before you feel ready.

Staying in motion beats having the perfect strategy. When you save something every month, you build a habit. When you skip the impulse buy, the habit grows stronger. When you check your balance and see growth, you start to see yourself differently. That shift is what makes everything else possible.

Most people who never save their first $10K are just as capable as anyone else. They’re waiting for the right moment. A raise, a better job, fewer expenses, something. But that moment doesn’t show up. Life keeps happening. The car breaks down, someone gets married, you need a new phone. There’s always a reason to put it off. In the words of Seneca “the one thing all fools have in common, is that they’re always getting ready to start”.

So here’s what you do TODAY (Not tomorrow):

• Set up an automatic transfer

  • Doesn’t matter if it’s $100, $50, or $25. Just pick a number and automate it.

• Run it for three months, and then bump it up by $25.

• Keep adjusting as you figure out what works.

The important part is getting started, not getting it perfect.

You can absolutely do this on your own. Everything you need is in this article. However, if you want someone to map out your specific timeline, help you pick the right accounts, and keep you on track, we can help you with this. For more information contact info@nextgenfinance.ca. We have helped dozens of people identify, and set up a clear path to $10K and beyond. Either way, the move that matters most is deciding to start.

Your first $10K won’t be easy, but the path is simple. And you can do it.

Disclaimer: The information discussed in this blog is not financial advice, and is meant for educational purposes only. Please consult a personal financial expert before making any financial decisions.

References

Clear, J. (2018). Atomic habits: An easy & proven way to build good habits & break bad ones. Avery.

Covey, S. R. (1989). The 7 habits of highly effective people: Powerful lessons in personal change. Simon and Schuster.