Registered Retirement Savings Plan (RRSP)? Guaranteed Investment Certificate (GIC)? Government bonds? Investment fund? Plain old bank deposit? Piggy bank? You know you can save at least a little every month. What should you do with your savings to keep them safe and get the best return? There are many options, and often it's not clear which is best for you.
In this section, you will learn:
the main ways that people use to keep their savings secure
how to choose the savings vehicle that is best for you
how to get the best return on your savings.
A savings vehicle is just a way to hold your savings. A savings vehicle can be as simple as a savings account at your financial institution. It can be a term deposit or a bond, or it can be a sophisticated investment. There are many to choose from, each with different features that make them more or less suitable for your needs.
For more information about earning money with your savings, see the Investing module.
A savings account pays interest on the money you deposit, also known as the principal. Many people who open a savings account also have a chequing account for their day-to-day banking.
Choosing a savings account is an important financial decision that can help people achieve their financial goals. Banks offer customers a variety of options when it comes to savings accounts. This lesson focuses on the following three types of savings accounts: traditional, money market, and certificate of deposit.
Even for non-residents living, working or going to school in Canada, banks offer a variety of bank accounts that can be opened in person or online, in a few steps.
And its 2019 figures indicate that Canadians under 35 had average savings of $10,720 in the bank, along with $8,395 in a tax-free savings account (TFSA), and $9,905 in a registered retirement savings plan (RRSP).
As of May 2024, no banks are offering 7% interest rates on savings accounts. Two credit unions have high-interest checking accounts: Landmark Credit Union Premium Checking with 7.50% APY and OnPath Credit Union High Yield Checking with 7.00% APY.
Contributions to an RRSP lower your taxable income. You can generally contribute up to 18% of your previous year's earned income up to an annual maximum ($27,830 for 2021). The investments in the plan can grow tax-free until you withdraw the funds.
U.S. government securities–such as Treasury notes, bills, and bonds–have historically been considered extremely safe because the U.S. government has never defaulted on its debt. Like CDs, Treasury securities typically pay interest at higher rates than savings accounts do, although it depends on the security's duration.
$10,000 in general is a lot of money anywhere in Canada. It can pay anywhere around 3~4 months worth of rent + expenses involving the apartment (it could be less depending on which location you're talking about). $10,000 can also buy you about 5~10 years worth of food for 1 person.
By many metrics, $100,000 a year is still a lot of money. It's more than what roughly 90 per cent of Canadians declared as their annual incomes in 2020, according to the latest available data from Statistics Canada.
Interest from a bank account is usually taxable income and you have to report it on your return. If your interest income is over $50, you'll receive a T5 slip (and an RL-3 if you're in Québec) from your bank.
Unlike a traditional savings account, a TFSA allows you to build an investment portfolio without paying taxes on contributions, interest earned, dividends, or capital gains.
A TFSA is a type of registered investment account, which means you can hold income-generating investments in it versus just cash (like a savings account). The types of investments you can buy in your TFSA depend on where you open an account.
The main difference with a TFSA is that although you don't get a tax break when you contribute, you would not pay any capital gains tax to the Canada Revenue Agency (CRA) when money is withdrawn. Despite the name, tax-free savings accounts do more than what savings accounts can do.
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Introduction: My name is Msgr. Benton Quitzon, I am a comfortable, charming, thankful, happy, adventurous, handsome, precious person who loves writing and wants to share my knowledge and understanding with you.
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