Why should an individual save? There are a number of reasons why individuals should save on their own, without relying exclusively on government or employer-sponsored pension plans.

• To increase future consumption.
• To maintain current consumption if earnings fall.
• To stabilize consumption over a lifetime.
• To preserve a reasonable lifestyle.
• To build an estate for heirs.

Savings consist of spreading consumption over time; and they result from the postponement of current consumption in order to be able to fund future consumption. Consumption at some point in the future is determined by future savings, current savings already accumulated, and the investment return on the current savings (including the effects of income tax). Savings increase future purchasing power only if the real return on savings is positive, i.e. greater than the rate of inflation. Current savings, which are also called asset reserves, would include forced savings such as the Canada Pension Plan (CPP) and employer sponsored registered pension plans (RPPs). These types of forced savings plans affect the level of voluntary savings, but they will eventually contribute to future consumption.

The purpose of an investment policy is to outline or provide a basis for an asset allocation mix that is suitable to the investor's goals, constraints, and risk tolerance. An investment policy establishes objectives along with the approach that is to be used to obtain them. The benefit of a written investment policy statement is to maximize the investor's well being and net worth while considering the financial objectives and any specific constraints that are imposed by the investor.