What Are RRSPs, TFSAs, and RESPs Anyway?

The Alphabet Soup of Canadian Finance

One of my biggest pet peeves in the world of Canadian investments is the phrase, “I should really buy some RRSPs this time of the year.” *usually spoken in Jan-March*

Nothing shows our lack of financial literacy better than that sentence!

I mean think about how many things that are wrong with that commonly said statement.

1) RRSPs have no tangible intrinsic value.  They are merely an account.  You can’t buy or sell an RRSP.  It doesn’t pay a dividend.  Opening 97 RRSPs at various financial institutions doesn’t make you any wealthier!  Therefore, you cannot EVER “buy RRSPs”.

2) Buy stating that you should buy RRSPs you are revealing how little you know about what actually constitutes an investment and what you are allowed to invest in within your RRSP.  This is the type of thinking that allows Canadian MER fees on mutual funds to be amongst the highest in the world.

3) You can contribute to your RRSP at any time of the year!  Why would you wait for the period of the year that comes right after the orgy of consumerism that is the Christmas season?  That’s really poor planning and again shows a lack of basic understanding on how an RRSP works.

I don’t get mad at folks for not know about the seemingly endless acronyms that make up our wealth management world in Canada.  At what point does anyone tell us it is important to know these things?  Most people are shocked when I explain to them that understanding the difference between a TFSA and an RRSP could likely save them tens of thousands of dollars over the course of their lifetime.

Many of my buddies are beginning to start their families and have children.  When I show up to a one-year-old’s or two-year-old’s birthday party with a cheque in hand that has “RESP” written on the memo I often get some funny looks.  Understanding how Registered Education Savings Plans works can mean the difference between your child going to post-secondary schooling or not.  It can mean graduating with $25K in debt – or NOT!  Check out the articles below for some simple facts about RRSPs, TFSAs, and RESPs, in addition to advice on how to best make use of the programs.

Tax Free Savings Account (TFSA) – The Basics

Registered Retirement Savings Plan (RRSP) – The Basics

RRSP vs TFSA – Which One is Best?

$10,000 TFSA Contribution Room

Over Contribution to TFSA

Canadian Dividends Explained

The Mad Scramble of RRSP Season – Why?!

Mutual Fund Basics

Registered vs Non-Registered Accounts in Canada

Why are Management Expense Rations MERs So High in Canada?

TFSA vs RRSP: Head to Head Comparison

There has been a lot of talk about which one is better, the TFSA vs RRSP in both the PF blogosphere and the media.  Both are great savings and investing tools for us Canadians, but there are important differences between and choosing correctly between the Tax-Free...

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Overcontribution of TFSA Update

Ahh the Tax Free Savings Account.  So misunderstood, so lovely, and so useful.  Such a great creation since 2009 because you can contribute up to $31,000 cumulatively if you haven't started contributing yet.  However, often with great power comes great responsibility...

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So I Over Contributed on my TFSA

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“USA Citizens” and The RESP/TFSA Battle

Is anyone else sick of dealing with bureaucratic machines that are absolutely terrible at what they are trying to accomplish? To catch a few of you up, I am one of the million or so Canadian citizens that has been residing in Canada and paying my fair share of taxes...

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Misinformation on Mutual Funds

I’m a huge fan of the Globe and Mail. I read it every day, and the finance section is usually full of good stuff including my boy Rob Carrick who has become a sort of Canadian guru in own right. We have even been featured in the online version of the publication on...

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Corporate Class Funds – I’ll Pass

Recently I was talking to one of my buddies that works in the world of agricultural finance (so he and his co-workers are familiar with many basic financial principles) and he asked me for my opinion on corporate class funds. I told him that to be honest, I didn’t...

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TFSA vs RESP Contributions

In the past we have compared RRSP and TFSA accounts, and RESP vs RRSP accounts, so today we’re going to do a head-to-head comparison of TFSA vs RESP contributions. For those of you that aren’t aware of what all of these acronyms mean, a Tax Free Savings Account (TFSA)...

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Investors Group Update: Lower MERs

Slowly but surely, those who are preaching the low MER fees Gospel (and I will proudly number myself among the faithful) are winning the battle for the hearts and minds of Canadian investors. Despite the fact that we still pay the highest mutual fund fees in the world...

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Investing in a TFSA as a Student: Your Options

Since I'm going back to school in September, I have started to reminisce about the good ol' times of my undergraduate degree, when I had absolutely nothing to worry about except to get good grades, work at my care-free retail part-time job, and party on the weekends...

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