This is something you might not find often on a mom blog. I’ve been thinking of sharing some tips regarding financial wellness. So I’m hoping these tips help moms who are looking to be more financially saavy.
TFSA, Tax-Free Savings Account.
- Money earned via investment is tax-free
- Unused contribution rooms accumulates
- Tip: Look into beneficiary info
RRSP, Registered Retirement Savings Plan
- Lower taxable income
- Can be used for first home purchase
- Or continuing education
Lower your taxable income – What does that mean? If you make $100,000 and you contribute $30,000 into your RRSP. You’re paying taxes on an income of someone who is making $70,000.
To see what your tax return can look like, visit the EY calculator.
Okay, so which one should I go with?
When looking into investing, your income plays a role to determine where you should put your funds.
With a higher income, it makes sense to maximize both your RRSP and TFSA account. With a higher tax bracket, by putting money into your RRSP you can save on income taxes.
Tax-free earnings from investments from TFSA.
A mid-range income might benefit from a TFSA in the short term while you accumulate RRSP room that is carried over from the previous years. This is particularly helpful if you’re planning on moving into a higher tax bracket.
A lower income range might not benefit from an RRSP if your expected retirement income and tax bracket is higher than it would be than it is now. The taxes you pay on withdrawal will end up exceeding the savings in tax deduction now.
Let me know what you would like to learn more about.
And as always, please discuss your financial goals & needs with an financial advisor.