TFSA or RRSP: what's the right way for you to save?

So you’ve started thinking about investing for your future, but you’re not sure where to start. With so many different options out there, it can be easy to get overwhelmed by all the acronyms and percentages being thrown your way.

Most financial institutions offer two very popular options for saving: TFSAs (tax-free savings account) and RRSPs (registered retirement savings plan). Getting started with either of the two is a great decision, but each account comes with its own pros, cons, and details worth knowing.

Depending on your current needs and goals, one account may suit you better than the other right now. With that, let’s delve into each one so you know where to put your dollars first.

While they both offer valuable saving opportunities, TFSAs and RRSPs can also hold a variety of investments alongside your cash. That being said, these two accounts still have a few notable differences between them. We’ll cut to the chase with some of the keywords you might be looking for:

*u.s. dividends will be subject to a withholding tax.

As previously mentioned, investing in either account is a great call for your future. But depending on where you are right now financially, one might be a better fit than the other.

If you’re looking to tuck money away but can acknowledge that you may need to dip into your savings from time to time (life loves to throw pricey curve balls sometimes), you’d probably be best off with a TFSA. It’s also a great option if you want to save for short-term goals, like taking a trip or putting a down payment on a car. It gives you the opportunity to save and invest, meaning your money can potentially grow on its own without being locked in.

On the other hand, if you’re in a financial position to put money away for a long-term period, an RRSP may suit you better. Depending on your yearly income, the tax deductions that come with RRSP contributions could prove to be very beneficial in the short-term. Plus, an RRSP grants you access to the Lifelong Learning Plan and Home Buyer’s Plan, which respectively allow you to make tax-free withdrawals for going to school or a down payment on your first home up to a maximum amount.

Want more insight on choosing the right account for your investments? Take an in-depth dive with How to choose the right account for your investments. If you want a bit more info on TFSAs and RRSPs, we’re happy to provide you with it through the links below:

Learn more about TFSAs

Learn more about RRSPs

Whichever account you choose, Questrade is here to support you along the way. You can open an account entirely online, and it only takes a few minutes to get started. Whenever you’re ready to jump in, we’re happy to help you invest.

Note: The information in this blog is for educational purposes only and should not be used or construed as financial or investment advice by any individual. Information obtained from third parties is believed to be reliable, but no representations or warranty, expressed or implied, is made by Questrade, Inc., its affiliates or any other person to its accuracy.