Saving can be tough when there’s so much day-to-day money stuff to deal with, but it’s critical to future financial success.
There are a variety of savings options available in Canada, but the big two are Registered Retirement Savings Plans (RRSPs) and Tax Free Savings Accounts (TFSAs).
When it comes to deciding which savings plan is right for you, there’s a lot to consider, including what each is for, how they work and what financial goals they’re best suited to. It can be a lot to wrap your head around, so we thought we’d help you get started.
In partnership with the Financial Pathways Collaborative and Chartered Professional Accountants of Canada, the Edmonton Public Library offers access to programs spanning a variety of financial topics.
The next one, which dives into what you need to know about RRSPs and TFSAsopens a new window, takes place on Sunday, February 25 from 2 to 3:30 p.m. at our Jasper Place Branch. This workshop goes into great depth about the differences between these two options, covers how to decide which to invest in and includes the opportunity to learn more about available products (without a sales pitch). Register todayopens a new window to ensure your spot.
3 Financial Planning Questions Everyone Should Ask Themselves
We asked the financial experts who present our workshops what they wish people knew about saving and they told us that there are three important questions that you need to ask yourself when you’re deciding whether an RRSP, a TFSA or a combination of both are right for you.
The big three questions are:
1. What kind of lifestyle do I want to have in retirement?
Knowing how you plan to live and what your estimated budget may be when you retire will help immensely in planning for your retirement. Thinking ahead about your lifestyle will help you to determine how much you need to save, then you can you put together a financial plan that’s right for you.
2. Do I want to save for long term goals other than retirement?
RRSPs are, as the name suggests, intended for retirement savings.
While retirement is one of the biggest (and most important) long-term savings goals out there, you might have other savings goals—both long and short term—that you want to work towards as well. Perhaps you want to save for a home, a new car or even a vacation. This is where a more flexible savings account like a TFSA can work well.
3. Am I okay with paying taxes in the future if it means I can reduce the taxes I owe now?
With an RRSP, you pay taxes when you cash it in. The assumption is that, as a retiree, you would be in a lower bracket and end up paying less in tax.
With a TFSA, you receive no tax deduction now and don’t pay tax when you withdraw the funds either.
There are, of course, plenty of important things to ask yourself—and lots of research to do—when deciding if an RRSP or TFSA are right for you, but these three cornerstone questions are a great place to start.
Personal Finance Resources
Can’t make it to one of the free workshops available? EPL also offers tons of free digital resources that will whip you into financial shape. All you need is your library card.
Lynda.com offers a wide variety of personal finance coursesopens a new window, including exploring personal investmentsopens a new window, managing personal cash flowopens a new window and even weekly finance tipsopens a new window to help keep you on track!
Another great place to find information on personal finance and investmentsopens a new window is Gale Courses. You can learn the keys to successful money managementopens a new window or take an introductory course about stock optionsopens a new window. Every EPL customer can take three Gale courses per year.
Are you feeling the money crunch and wishing you knew more about your personal finances? Have no fear, your local library is here!
Knowing what TFSAs and RRSPs are, the differences between them and the things you need to consider to determine which is right for you are key to creating an effective savings plan that will help you reach your goals. EPL can help.