What percentage of income should I invest?

A common starting point is the 50/30/20 framework: 50% on needs, 30% on wants, and 20% on savings and debt repayment. Within the 20%, your investment allocation depends on your emergency fund status and existing debt. Many long-term investors target 10–15% of gross income specifically for investing once other financial priorities are in order.

How do I calculate how much I need to invest to reach a goal?

Work backwards from the goal. If you need $500,000 in 25 years and expect a 7% annual return with no starting balance, the required monthly contribution (assuming monthly compounding) is approximately $617/month. With a $50,000 starting balance, roughly $265/month closes the gap. The compound interest calculator can help: enter your starting balance, choose a return rate, and adjust the contribution until the result matches your goal.

How much TFSA room do Canadians have?

The TFSA annual contribution limit for 2024 is $7,000, which is $583/month. Cumulative room since the TFSA launched in 2009 is $95,000 as of 2024 for those who have never contributed. Unused room carries forward indefinitely, and withdrawals restore the room in the following calendar year.

Should I pay off debt before investing?

Compare the guaranteed cost of debt against the expected (uncertain) return from investing. High-interest debt (credit cards at 20%+) should generally be paid off before investing. Lower-interest debt (mortgages at 4–6%) can often run alongside regular investing, since expected equity returns have historically exceeded mortgage rates over long periods. This is a personal decision; neither approach is universally wrong.

How Much Should I Invest Monthly? A Practical Guide

There is no universal right answer — but there is a clear framework. Start from your goal, work backwards through the math, and account for the Canadian accounts that give your contributions the best tax treatment.

Start with a framework: the 50/30/20 rule

A common starting point: 50% of after-tax income on needs, 30% on wants, and 20% on savings and debt repayment. Within that 20%, how much goes to investing depends on your emergency fund status, high-interest debt, and goals. Many long-term investors target 10–15% of gross income specifically for investing once other priorities are handled.

Working backwards from a goal

Define the goal: "I want $500,000 in 25 years."
Choose a realistic return assumption: 6–8% is common for a diversified equity-heavy portfolio before inflation.
Account for your starting balance: $50,000 at 6% over 25 years compounds to approximately $215,000, so contributions need to cover the remaining $285,000.
Use the compound interest calculator to find the monthly contribution that closes the gap.

Worked example: reaching $500,000 in 25 years

Starting balance $50,000, 7% annual return compounded monthly:

$250/month: ending balance approximately $488,789
$500/month: ending balance approximately $691,307
$700/month: ending balance approximately $853,321
$1,000/month: ending balance approximately $1,096,343

Starting with $50,000 at 7%, even $250/month reaches close to the $500,000 target. Contributions of $500/month or more push well beyond it.

The Canadian context: use your TFSA first

The Tax-Free Savings Account (TFSA) is one of the most powerful investment vehicles available to Canadians. Growth, dividends, and withdrawals are tax-free. The 2024 annual contribution limit is $7,000 ($583/month). Cumulative room since 2009 is $95,000 for those who have never contributed. After the TFSA, the RRSP offers a tax deduction on contributions and tax-deferred growth.

Starting earlier beats contributing more

At 7% compounded monthly, no starting balance: Investor A starts at 25 with $300/month and reaches approximately $787,000 by age 65. Investor B starts at 35 with $500/month and reaches approximately $610,000. Ten compounding years matter more than an extra $200/month.

Frequently asked questions

What percentage of income should I invest?: A common starting point is 10–20% of gross income, depending on financial priorities. Many long-term investors target 15% once emergency funds and high-interest debt are handled.
How do I calculate how much I need to invest to reach a goal?: Work backwards from the goal: define the target, choose a return assumption, subtract what your starting balance will compound to, and use the compound interest calculator to find the monthly contribution that covers the remaining gap.
How much TFSA room do Canadians have?: The 2024 TFSA annual limit is $7,000 ($583/month). Cumulative room since 2009 is $95,000 for those who have never contributed. Unused room carries forward and withdrawals restore room in the following calendar year.
Should I pay off debt before investing?: High-interest debt (credit cards at 20%+) should generally be cleared first. Lower-interest debt (mortgages at 4–6%) can run alongside regular investing since expected equity returns have historically exceeded mortgage rates over long periods.

Use the compound interest calculator to find your contribution amount, or the FIRE calculator to model financial independence from your savings rate.