Time to Begin Saving!

Putting together the funds for a down payment often takes time and a solid strategy that goes beyond tucking a few dollars away each month. Luckily, Canadians have access to a number of investment savings accounts that can optimise their savings towards homeownership. 

Unlike a standard savings account, an investment account offers specific tax and interest benefits a regular account won’t have, making an investment savings account more advantageous when building for a down payment. 

Registered Retirement Savings Plan (RRSP) 

When you contribute to an RRSP, those funds are exempt from tax, capital gains, and dividends, so long as the funds remain in the plan. You usually have to pay tax when you cash in, make withdrawals, or receive payments from your RRSP. 

The amount you invest into an RRSP reduces your net income, but lowers the income tax you pay, therefore offering a tax break. However, RRSPs have an annual contribution limit, meaning you can only invest so much income into them per year. 

Tax-Free Savings Account (TFSA)

A TFSA is a tax-sheltered account that allows users to hold a variety of investments. 

Unlike an RRSP, a TFSA won’t offer you any up-front tax breaks, but any savings you put into the account can grow tax-free. Whenever you want to withdraw money from your TFSA, those funds are also exempt from taxes. Similar to an RRSP, however, a TFSA will only allow you to contribute a specific amount of funds each year. In 2022, the TFSA contribution limit is $6,000.

First Home Savings Account (FHSA) 

One of the newest types of investment savings accounts on the market, the tax-free FHSA was unveiled in April as part of the federal government’s 2022 budget, and will be made available in 2023. 

Marrying together some of the features of a TFSA and RRSP, Macmillan says the main goal of the FHSA is to help more Canadians purchase their first home and make ownership more accessible.