- Your debt’s under control, you’ve got an emergency fund and some savings. Congrats!
Now you want to know how to put your money to work for some long-term gains.
♪♪
I’ll explain in the time it takes me to get a hole in one... blindfolded
- Whatever
- First, you need to know where to put your savings.
There are 2 main kinds of savings accounts: registered and non-registered.
A registered account acts as a tax shelter.
Non-registered accounts don’t have the same financial advantage but there’s no limit on how much money you can put in.
So, which registered investment account should you choose?
Because that’s usually the one you should take advantage of first.
The Registered Retirement Savings Plan is used in retirement.
It allows you to lower your taxable income and defer your taxes until you make a withdrawal.
- Are we going to play golf when we retire?
- This is not golf.
It’s mini-putt
- This is not golf.
It’s mini-putt
We usually withdraw our RRSPs during retirement, when our income is lower.
So, at the end of the day you could be paying less tax
[whispering]
Which means more money in your pocket.
♪♪
You can also withdraw from an RRSP for projects like buying a first home or going back to school.
An advisor can give you tips on how to do that!
- Did I get it? Did I get it?
- Shhhh...
A Tax Free Savings Account can help you save for a project like buying a car or going on vacation.
When the time is right.
Now, unlike RRSPs, the money you put into a TFSA doesn’t reduce your taxable income.
But here’s the good news!
The gains you make on a TFSA are not taxable, even when you withdraw them.
[whispering]
Which means more money in your other pocket.
♪♪
But be careful, both RRSPs and TFSAs have a maximum you can contribute each year. RRSPs and TFSAs are very well known.
But other investment solutions exist, like the RESP, Registered Education Savings Plan, that lets you save for your kids’ college, if you want kids, that is.
- Do we want kids?
- Uhm, let’s start with a dog
- Yeah, we’ll name him Tiger.
- You can speak to an advisor about the best investment solutions for you.
[whispering]
I just won.
- Did I win?
♪♪