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.
This is the last of the four part series in which I disclose in a sneaky and mysterious manner what I'm holding in my Tax Free Trading Portfolio for 2011. In the first part of the series, I talked about Exchange Income Corporation (the aviation/manufacturing...read more
Here's part three of the five part series on what I'm holding in my TFSA. We're halfway through, so just one more Wednesday of putting on your thinking caps and guessing what equity I bought and it'll be back to my regular posts. 🙂 In this series, I am sharing what...read more
Alright, I promised that I would share the other 4 equities I bought to hold in my TFSA aka Tax Free Trading Account. With the markets plummeting these past few days, it might be a good idea to load up on some stocks you have been keeping an eye on. The volatility is...read more
As you know, I sold off my Tax Free Trading Account portfolio (remember, it's a "souped up" TFSA) and took the money out for the house down payment. My portfolio was up about 20% Return on investment, but 2010 was such a great year for making gains on the stock...read more
As you (my fellow Canucks) probably know by now, the Harper government introduced a new savings vehicle in 2009- the TFSA! TFSA's are great- they grow tax free (that's a beautiful thing!) and you can withdraw money whenever the heck you want. But can you re-invest...read more
Since everyone is likely busy finding money to fill their RRSP's (the deadline is March 1, 2010 to claim for the 2009 tax year by the way), people probably aren't focusing on the TFSA's right now. If you are a 20something and are in school and aren't making that much...read more
This is another “bonus” for RRSP’s. I think I would definitely take advantage of it, if you have that much money saved up in your RRSP’s. The Home Buyers Plan The Canadian government recently up’d the amount from $20,000 withdrawal, to $25,000 this year (2009). The...read more