SAVINGS AND INVESTMENT PLANS
Discover the different investment vehicles to optimize your taxes and reach your financial goals.
TFSA — Tax-Free Savings Account
A plan that lets you set money aside sheltered from tax. Investment gains (interest, dividends, capital gains) earned in a TFSA are not taxable, even when withdrawn.
FHSA — First Home Savings Account
A plan designed to help individuals save for the purchase of their first home. It combines the benefits of an RRSP (tax-deductible contributions) and a TFSA (tax-free withdrawals for a home purchase).
RRSP — Registered Retirement Savings Plan
A plan designed primarily for retirement savings. Contributions are deductible from your taxable income, which reduces your annual tax payable. Tax is deferred until funds are withdrawn.
RESP — Registered Education Savings Plan
A special investment account used by parents to save for a child's post-secondary education. This plan gives access to generous government grants added to your savings.
RDSP — Registered Disability Savings Plan
A savings plan that helps Canadians living with a disability and their families save to ensure their long-term financial security. It also allows access to government grants and bonds.
Frequently asked questions about savings
What is the difference between an RRSP and a TFSA?
The RRSP (Registered Retirement Savings Plan) lets you deduct contributions from your taxable income, reducing your tax bill immediately. Growth is tax-deferred, but withdrawals are added to your taxable income in retirement. The TFSA (Tax-Free Savings Account) offers no upfront tax deduction, but all withdrawals — including gains — are completely tax-free. Strategy: favour the RRSP if your current marginal tax rate is high, the TFSA if your income is lower or if you want complete flexibility without tax consequences on withdrawal.
What is the FHSA and who can use it?
The FHSA (First Home Savings Account), launched in 2023, is designed exclusively for first-time home buyers. It combines the benefits of an RRSP (tax-deductible contributions) and a TFSA (qualifying withdrawals for a home purchase are completely tax-free). Unused contribution room carries forward to the following year. To be eligible, you must not have owned your principal residence in recent years. It can be combined with the RRSP Home Buyers' Plan (HBP) to maximize your down payment.
How does the Canada Education Savings Grant (CESG) work in an RESP?
The federal government automatically contributes a percentage-based grant on annual RESP contributions. Families with low or middle incomes may receive an additional grant. Québec also offers the Quebec Education Savings Incentive (QESI). Unused CESG room from previous years can be carried forward and caught up in future years. When funds are withdrawn for education, they are taxed in the student's hands — typically at a very low rate given their modest income during studies.
Can I withdraw from my RRSP before retirement?
Yes, but important tax consequences apply. Outside of specific programs, any RRSP withdrawal is added to your taxable income for the year and is subject to a progressive withholding tax. Two programs allow tax-deferred withdrawals: the Home Buyers' Plan (HBP), for a first home purchase, and the Lifelong Learning Plan (LLP), for full-time education. Unlike the TFSA, regular RRSP withdrawals do not restore contribution room — that room is permanently lost.
At what age should I start investing?
As early as possible. Compound growth is the most powerful force in personal finance: even small, regular contributions invested early can make a significant difference over the long term. The priority at any age: first capture any employer matching contributions if available, then maximize the FHSA if you plan to buy a home, then split between RRSP and TFSA based on your tax situation. A free consultation with MAB Services helps establish a realistic, personalized plan starting today.
Should I pay off my debt or invest in a TFSA or RRSP?
The general rule: pay off high-interest debt first — that is a guaranteed return that few investments consistently beat. Credit card debt and high-interest personal loans are always the priority. For a low-rate mortgage, investing in parallel often makes more financial sense, especially in an RRSP if the tax refund is reinvested. If your employer offers RRSP matching, always contribute enough to capture the full match first. The optimal balance depends on your marginal tax rate, time horizon and risk tolerance.