Savings Plans to Help Grow Your Wealth
Your future is full of potential. Whether you’re planning on buying a home, retiring on your own terms, or paying for your children’s education, the possibilities for growth are endless. But no matter what you intend on achieving, you’ll always need a good plan – and better finances.
Nowhere is this clearer than in the way Canadian home prices have skyrocketed over the past ten years. According to a recent study, the average price for a house in the Great White North has climbed well above $700,000 – an amount that’s increased a staggering 31.6% from the year prior. Nor is this trend showing any signs of slowing down. Prices are projected to peak over $770,000 by the end of year. With the median household income in Canada being, as of 2019, $87,930, the average family can no longer afford the average home in Canada.
Should numbers like these discourage you? No. At Archway Insurance, we believe in your ability to achieve what you dream. That’s why we’ve put together this list of the three most common ways of saving money in Canada, and how they can help you grow your wealth:
- Registered Retirement Savings Plans (RRSPs)
- Tax-Free Savings Accounts (TFSAs)
- Registered Education Savings Plans (RESPs)
Of course, the best way to save is with an institution you know and trust. At Archway Insurance, we offer all of the above mentioned financial services and more. Read on, to find out how you can begin growing your wealth today.
Registered Retirement Savings Plans
What matters more to you? Buying a home, or saving for your retirement? By investing with a registered retirement savings plan (or RRSP, for short), you don’t have to choose one or the other – you can do both. You can even use funds in the account towards your lifelong learning goals, such as a master’s degree or that course in computer programming you’ve always wanted to take.
That’s because the retirement savings plan isn’t just for your retirement. Despite its name, you should think of the RRSP as an all-in-one investment account for long-term financial goals. Every year, you can contribute up to 18% of your earned income towards the plan; and because this money is being redirected from your spending account to your long-term savings, you can deduct the amount you contribute from your total taxable income for the year. In this way, you are minimizing the amount you owe the government, while maximizing the amount you are saving. Furthermore, the income you redirect into your RRSP can then be invested, thus increasing your potential earnings even further. Talk about a retirement plan!
The downside to saving money in your RRSP is that any amount you withdraw from the account will be counted towards your income for that year, unless you are granted an exception – as in the case of the First Time Home Buyers Plan. Caution is therefore required when using your RRSP: it can help you pass major financial milestones, but its misuse can be damaging, too.
For an investment account that is a little more flexible with its features, you might want to look at the next item on this list.
Tax-Free Savings Accounts
Maybe your plans aren’t so far-reaching. Not every investment plan needs to aim for goals like retirement, homeownership, or continuing education. For simpler goals, like paying for vacations, a Tax-Free Savings Account is ideal. It allows you to move your hard-earned money into a registered plan where the money you make in interest or returns on investments won’t be subject to capital gains tax.
Think this is just a minor advantage? Think again. Capital gains taxes cut the earnings on your investments by 50%, if they’re held outside registered plans. Meanwhile, with your TFSA, every cent you earn you keep.
With benefits like these, you might be wondering why people don’t use their TFSAs for all their financial needs. The reason is that there are limits on the contributions you can make and overcontributing can result in Canada Revenue Agency penalties. Therefore, it’s advisable to review eligibility requirements and contribution limits here before proceeding.
Your Tax-Free Savings Account can’t satisfy every investment goal. For your children’s education, in particular, the next item on this list is your best option.
Registered Education Savings Plans
You’ve been working hard, since the day your child was born, to ensure they have a bright future – and, in Canada’s ever more competitive jobs market, that means a good education. With average tuition costs for undergraduate programs in Canada projected to crest above $6500 for the 2021/2022 school year, a bright future also means a sizable investment.
The good news is that you can invest for your children’s education while ensuring the funds are exempt from taxes. When you open an RESP, you are the subscriber; your child is the beneficiary. The money you contribute grows tax-free, whether it’s accruing interest as cash savings or collecting returns from mutual funds and other investments. Perhaps most importantly, there’s no ceiling on the amount you can contribute to the account each year, though there is a lifetime limit of $50,000.
If you’re a new parent, making financial decisions for your child, 18 years in advance, might seem difficult. But with the RESP, nothing could be easier.
Invest With Archway Insurance
Your future is full of potential, and the sooner you begin saving for it, the sooner you can make your dreams reality. At Archway Insurance, our savings plans can help you stay on track with every one of your life goals:
- Our RRSPs can help you retire happy and secure;
- Our TFSAs can help you save money without worrying about taxes; and
- Our RESPs can ensure your children’s education is funded before they ever step inside their college or university.
Don’t wait for your future to pay for itself. Whether you live in New Brunswick, Nova Scotia, or Prince Edward Island, you can start taking steps to grow your wealth with our savings plans when you call Archway Insurance at 1-833-536-0529.