A Registered Retirement Savings Plans (RRSP) is a registered account that allows you to save and invest in your future.
Tell me More…
Did you know that you can open an RRSP once you are of legal working age and have filed one income tax return? That’s 14 years old folks!! If the Canadian Government is allowing youngsters to develop good saving and investing habits early, where are so few doing it? Well, The Budget Babes believe it’s because of the lack of personal finance education in the school curriculum and at home. It’s not to say that students aren’t being taught valuable things, but how is there no education on money? It’s something we use EVERY DAY!! Think of how much better you would be with your personal finances if you started learning at a young age. You would likely have more savings because you’d understand how to budget properly and would have more confidence in making investment decisions.
Why aren’t they teaching this in schools? Short answer is I don’t know, but I’m here to help you now. There is no better time than the present to invest in your future, and the RRSP is a great account to get you there.
Opening an RRSP:
It’s as easy as opening a TFSA! Make an appointment with the financial institution of your choice, and open a self-directed or a managed account (be sure to ask about any fees). Figure out how much money you are comfortable to set aside (Budgeting101!) in the account. Then you can make things simple by setting up automatic deposits directly into your RRSP.
- The money that you contribute to your RRSP is tax deductible. See the red bubble in our infographic for an example of this!
- The money you contribute into your RRSP is all tax-free as long as you keep the money in the account!!!
- Some investments are not authorized to be purchased.
- Removing your money takes time and you are taxed on the amount you withdraw.
- This account is meant to help the average Canadian, and was not created to be a tax shelter for the wealthy elites. This is only a drawback for our readers that are making some serious coin.
The Time Is Now!
You have until March 1st 2017 to contribute for 2016. This means any money you deposit before March 1st will reduce your overall taxable income for 2016. Ultimately, you will pay less taxes to the government.
I created a handy RRSP infographic for you to refer to for additional information.