Budgeting for renters: Ways to build your savings

When it comes to the cost of rent, Canadians and their budgets have been stretched to the limit. Thankfully, prices are finally decreasing from their highs of 2022, but renters — particularly those in major cities — are still paying a premium.¹ Add the rising costs of food, utilities and transportation, and it can be hard to balance a budget, let alone put away money in your savings.

If this sounds too familiar, building your savings may understandably be the last thing on your priority list. But having that money to fall back on is an important part of financial stability.

Fortunately, there are strategies to help you budget as a renter and still put money away, even if your rent is high.

According to a survey by StatsCan and the Canadian Housing Market Corporation (CMHC), shelter costs went up nationally by more than 20% between 2018 and 2022. Renters, especially those newly renting apartments at that time, faced much higher rental costs.² Although rent prices have started to decline across Canada, they’re still a major expense.

As a general rule, if 30% or less of your household income goes to your rent or mortgage, your housing costs are considered affordable. If you're paying more than that, you may be spending more than you should. Fortunately, there are ways that you can lower your costs and find savings.

It’s really difficult to reach your goals without a plan, which is why making a rental budget is important. Having a budget:

• Helps you have a clear and current picture of your finances
• Gives you the tools to stop overspending
• Allows you to meet your savings goals

Building a budget doesn’t have to be complicated — it's just a list of your income and expenses. Under income include:

• Pay from your job
• Pay from any side gigs
• Student loans, grants, scholarships or bursaries
• Government programs like CPP, GIS or other benefits

Next, list all of your living expenses, like:

• Rent
• Utilities
• Transportation
• Food
• Tuition and books for students
• Clothes
• Entertainment

You’ll notice that there are two kinds of expenses: fixed and variable (aka needs and wants). Rent, utilities and food are needs, while new clothes and entertainment are wants. That doesn’t mean you should never treat yourself. Just understand the difference so you can be more effective in building your savings.

Need help building a budget? Scotia Smart Money by Advice+, found in the Scotia app, is a helpful tool Scotia clients can use for tracking bills, monitoring pending, managing cash flow and setting up a budget.³

Used as a guide, the 50/30/20 rule has you apply 50% of your after-tax money to your needs, 30% to your wants, and 20% to savings. It’s not a bad place to start, but for many renters, it’s not realistic — even if you have “affordable housing” (30% or less in rent).

Still, the 50/30/20 rule does prompt you to prioritize building your savings. Even if you can only spare 5 or 10% of your after-tax income, it’s worth doing. Putting away money regularly is good practice and will, over time, help you reach your goals.

Putting money into a savings account is often one of the first things people cut, especially when they’re low on funds, but it’s important to have money you’re putting away for your future.

Saving may seem like a challenge right now, but Scotia offers two smart saving tools that can help you save automatically — Pay Yourself First and Savings Finder.

1. Pay Yourself First is a tool that helps you set up automatic transfers from your recurring deposits, like payroll, right into your Money Master Savings Account. You set the amount or percentage, and this tool monitors your spending patterns, expenses and incoming funds and then moves money when it appears you can afford it.⁴
2. Savings Finder is a tool that looks at your source of income and cash flow to find ways to save small amounts here and there from your chequing account into your Money Master Savings Account when it appears that you can afford it.⁵ You set the monthly savings target, and Savings Finder will do the rest.

Both tools allow you to set savings goals and help you keep track of money movement with notifications. Plus you’ll get an ongoing interest rate boost on your Money Master Savings account while you’re enrolled in the tool.⁶ Learn more about the tools here.

In addition to longer-term savings options, it’s a good idea to build an emergency savings fund. It’s what you’ll fall back on in case of unexpected events like job loss, illness or a sudden expense. You should aim to have between three- and six-months’ worth of money put away.

Once you’ve settled on a savings goal, you need to find a way to meet it. Even small changes can add up.

When you reduce your expenses, you have more for savings.

The first place to cut costs is in your “wants” category. For example, you might dine out less frequently, buy fewer clothes or purchase second-hand, and limit your subscription services. Clipping coupons is a great way to treat yourself without spending as much.

Your utility bills are a good place to start when you’re looking to up your savings because small, easy changes can really add up.

Heating and cooling your home can cost a bundle, so think about keeping the heat lower and adding on a sweater. Consider turning off air conditioners or heaters when you're out of the house.

Smart thermostats make it easy to monitor and control your usage. Swap LEDs for your old, inefficient light bulbs, and unplug computers and appliances at the wall. Conserve water by turning off the taps when you brush your teeth and taking shorter showers (install a low-flow shower head for even better results).

You can save money by running appliances like laundry and dishwashers during off-peak hours. Every little bit helps your wallet.

In addition to cutting back, another solution is bringing more money in. There are a lot of creative ways to increase your income. You might put your hidden talent or excellent driving skills to good use by taking on a side hustle. Or make the most of the job you already have and go after a promotion.

Of course, if you can find a way to reduce your largest monthly expense — rent — it will make a big difference. Let’s look at ways to lower it.

Speak with your landlord: Not many people think of rent as a negotiable expense, but you may be able to get a reduction, particularly if you’ve proven yourself to be a responsible tenant. Strengthen your position by providing pay stubs or a credit report to prove your credit history. Include a letter of recommendation from a former landlord if you have one. Try asking for a rent reduction in return for committing to a longer lease.

Consider sharing your space: Shared housing is typically less expensive than living on your own, and you’ll save on more than just the rent. Roommates usually split household utilities like heat and hydro, and there’s the opportunity to share other expenses, like groceries and streaming services, if you want.

While living with others can sometimes come with challenges, good communication about house rules can help you stay on the same page. Your shared housing agreements should be in writing and should cover how you’ll split costs, division of labour, cleanliness expectations and a guest policy.

Change neighbourhoods: Where you live is one the biggest factors affecting the amount you’ll pay in rent, so consider a different area to reduce your rent. You can do a cost of living comparison to identify areas with affordable rents. In general, living in downtown areas of major cities is the most expensive. A word of warning: the further you have to travel, the more your transportation costs, so account for this in your budget.

Downsize: Square footage affects your rent, so downsizing can be a solid strategy. Review your lifestyle to identify what space you really need in your home. If you work outside the home, do you really need that home office? Those living in cities, particularly, can get many of their needs met in the community at the library, gym, coffee shops, and so on.