Opening a Savings account at a bank is a way to store your money safely. There are also term deposits and other products which may pay higher interest on savings. Ask at your bank (see list of banks in ‘Bank accounts’ section). In Canada you may be required to pay income tax on interest earned.
RRSPs are a great way to save money for retirement. You can choose to invest the money in a number of ways. You do not pay tax on these savings until you take the money out when you retire from working. Once you are retired, you can transfer your RRSP funds into income funds (RIF) or annuities to minimize taxes. RRSP’s are offered by banks and other financial companies. If you need to take money out of your RRSP before you retire, you will be taxed on this money.
You can also borrow money from your RRSP to purchase or build a home. You can borrow up to $25,000 and you will not be taxed on this money if you pay it back to your RRSP within 15 years. This is usually done in annual installments and is reported on your income tax form. For more information, see: CRA Home Buyers Plan or speak with your financial representative or your mortgage holder.
RESPs are a way to save money for your children’s post-secondary education in future. RESP’s offer compound interest and are offered by banks and other financial companies.
For information on how RESPs work and to find the best RESP for you needs, see the Canadian Government’s CanLearn website: CanLearn – Education Savings for Your Child
Another good reason to have an RESP for your child is that the Government of Canada offers a Canada Education Savings Grant (CESG) and the Canadian Learning Bond (CLB) for children who have an RESP. These offer additional money that is added to your child’s RESP. Your RESP provider will help you apply for these grants. For more information on the CESG and the CLB, see the CanLearn website: CanLearn – Canadian Education Savings Grant and CanLearn – Canadian Learning Bond
As of 2013, The Government of British Columbia is also offering a new BC Training and Education Savings Grant of $1200 for children born on or after January 1, 2007 who have an RESP. Click here for more information or ask your RESP provider for assistance.
Unlike regular bank accounts, money invested in a TFSA is not taxable, and can be invested in a number of ways. In Canada you can currently put aside $5,000 per year tax-free. If you need to take your money out of your TFSA, you pay tax at the time of withdrawal. TFSA’s are offered by banks and other financial companies.
The Canadian Centre for Financial Literacy (CCFL) offers worksheets on money matters including budgeting and saving in 8 languages. See Modules 3 and 5: CCFL Worksheets