Savings, as you know, are a tool. Not an end in itself, but a way to make your life plan come true. Whether long-, medium- or short-term, or whether they concern your professional or personal life, your goals guide your actions, and your savings give you the means to achieve them.
The big question remains: save, but how?
Tools you can use
Registered savings plans provide you with various tax benefits including tax-free interest that can help you increase your savings substantially. Certain conditions may apply to their use.
Non-registered savings accounts have no limits on deposits or withdrawals. However, they do not include any tax benefits and you will have to pay the required tax on the interest and dividends they generate.
Let’s take a quick look at the best ways to build your savings, depending on your goals.
Short-term projects
It may be a very personal desire to fulfill a dream of travel or to buy something you really want, or even a stage of professional life that you aspire to that drives you to push yourself even further, but these “small” projects often require a more or less significant investment in the short term. In this case, a registered savings plan like the TFSA allows you to withdraw funds without having to pay tax, while retaining the possibility of reinvesting the amount of the withdrawal since it is added to your annual contribution room for the following year.
Medium-term goals
For more complex projects that require a substantial investment, you have several options depending on how long you have been saving and the size of the amounts involved. The TFSA can still be your vehicle of choice if it contains the necessary funds. If you have a non-registered account, you could choose to withdraw funds from that type of account. The advantage of the non-registered account is that you can use this money at any time, since the investment income is taxed annually.
Children's education
You want to give them the best possible education, so invest in an RESP right away, if you haven’t already done so. With university tuition on the rise, this education savings plan can provide you with significant financial assistance for your children’s further education. Open the account early and take advantage of federal and provincial grants that will boost your savings, in addition to the tax benefit. If you have more than one child, the family RESP will give them the option of choosing whether or not to continue their education, with no penalty for you.
Return to school, really?
In your professional career, you may question certain choices or want to go in a different direction. In this case, the LLP (Lifelong Learning Plan) will allow you to withdraw sums from your RRSP to pay the education costs that your career reorientation or development may entail. Certain conditions apply and the amounts must be repaid at the rate of one tenth of the total amount each year, without interest.
Retirement life project
Even if you are passionate about your profession, one day you will want to step back and enjoy your life differently, without having to worry about your sources of income. The RRSP is your vehicle of choice for this plan: tax benefit for contributions and no tax on interest or capital gains during the accumulation period, possibility of income splitting with your spouse during retirement: the advantages are many and allow you to build your savings over time, especially if you opt for periodic contributions.
Autonomy, security, trust
Far from being an ethereal concept, savings are a very tangible way to manage your priorities and to make sure that your goals and projects don’t just remain the stuff of dreams. Each individual journey is different, and we want to give you the means to achieve your full potential. By drawing on the financial intelligence of our firm, you will get impartial advice and a tailor-made savings model that meets your needs. Talk to your advisor.
