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These are all government-registered accounts with the federal government that help with savings and financial goals.

These accounts provide tax benefits that help you reach your financial goals be it retirement, a first home, or an emergency fund.

To get a better understanding, we want you to think of these registered accounts as tax sheltered gardens.

You can plant your cash savings or investments (GIC’s, bonds, mutual funds, ETF’s and stocks) inside your garden to grow.

Because these accounts are registered with the government, the government acts as your ‘scarecrow’ protecting your planted cash or investments from taxes. So that you can grow your money without it being eaten away annually.

Let’s dive into your TFSA or Tax Free Savings Account. We like to think the TFSA is, THAT GIRL 💅 , because it is your most flexible savings tool.

This account can be used for any savings goal size so whether you are saving for a new phone or would like to pay off your student loans when you are done with school, the TFSA will be able to support that goal.

Any Canadian over the age of 18 with a valid social insurance number can open and use a TFSA. To open a TFSA you must go through an “issuer”, which can be done through your Canadian bank or a self directed brokerage.

Your contribution room is determined using a very simple formula: Your Available Room = New Annual Limit+ Unused Room (from previous years) + Withdrawals (made last year)

Your available room is the maximum amount of money you can deposit into your account, carrying over every year you are 18+ and a Canadian resident, even if you don't use it. Every January 1st, your room increases by the new annual limit determined by the federal government plus any unused room and the amount of any withdrawals you made the previous year. If you deposit more than this limit, the Canadian Revenue Agency will impose a monthly penalty tax on the over-contributed amount, so it is important to track your deposits!

Although all deposits into your TFSA are made with after-tax money and will remain a part of your taxable income for that year the primary tax benefit is that all investment earnings—like interest, dividends, and capital gains—grow completely tax-free while they are inside the account. You are never taxed on the growth or income generated by your investments, unlike in a regular investment account.

Crucially, when you withdraw the money at any time for any reason, the entire amount, including the original contributions and all the growth, is also tax-free and will not be a part of your taxable income again.

Your RRSP or Registered Retirement Savings Plan is up next!

Those who are middle or high income earners and that is because of the taxable benefits that come with this registered account.

Finally the newest registered account, The FHSA or First Home Savings Account.

This account is best for Canadians between 18 and 71 who would like to buy their first home.

Your annual contributions are $8000 a year of taxed income and contribution room carries over every year if you don’t contribute the full amount. The lifetime contribution limit is $40,000 which is the absolute most you can ever put into this account. Your contributions, like an RRSP, will reduce your taxable income and possibly increase your tax refund.

Your FHSA withdrawals for your first home allow you to “double-dip” your tax benefits. Like a TFSA, your growth and withdrawals are 100% tax free as long as it is used for that first home.

Okay, still with us and wanting to learn more? Check out our Good Advice center for even more of those Financial 101’s.