Whether you’re a saver or a stock picker, this simple strategy can help you maximize your RRSP and TFSA contribution space each year, even if you haven’t decided how you’re going to invest the money.
How to make your savings grow faster
Money grows faster in tax-efficient accounts. Not only will you save on taxes, but also on your savings over time.
RRSPs and TFSAs are two of the easiest accounts Canadians can use to take advantage of tax-advantaged investing. Interest, dividends and capital gains are not taxable when your investments are in these accounts. In addition, RRSP contributions give you a tax deduction.
Not sure which investments to keep in your RRSP? No problem – while you decide, you can put money into a high-interest RRSP savings account, and it counts as an RRSP contribution for the tax year it was deposited. For assessment year 2022 you can make contributions until 1 March 2023.
TFSAs don’t have a set deadline, but the contribution margin increases on January 1 each year. (For the past several years, the contribution allowance has been $6,000 per year, and the total lifetime contribution limit for 2022 is $81,500 for those born before 1991.)
Even if your long-term plan is to buy guaranteed investment certificates (GICs), stocks, exchange-traded funds (ETFs), mutual funds, or other eligible investments, contributing to a high-yield RRSP or TFSA savings account will now help your savings grow as you makes a decision. And by putting money aside with automatic contributions, you are ready to take advantage of market dips and new investment ideas.
Saving with automatic contributions
For most people, it’s easier to save smaller amounts throughout the year than to contribute a single larger amount. To make things even easier, you can set up automatic payments from your main bank account to your RRSP or TSFA. This “put it and forget it” approach will help you make the most of your contribution limits. Most financial institutions offer automatic transfers, often for free.
For example, EQ Bank allows you to set up recurring transfers weekly, monthly or at a frequency of your choice. Consider timing the contributions to coincide with your payday or other regular income. You can cancel the transfers at any time online or via the bank’s mobile app or change the time or amount. And EQ Bank has no fees for these services.
This post Not sure what to put in your RRSP and TFSA? Make a contribution anyway
was original published at “https://www.moneysense.ca/save/investing/high-interest-rrsp-tfsa-accounts/”
