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Money Advice for Life
Understanding investment accounts and products
Have you ever wondered how to make your money work harder for you? Investing can be key, but it can feel like a maze of confusing terms. This blog is here to help you and breaks down the different investment accounts and products in simple, easy-to-understand language.
Investment accounts and investment products serve distinct purposes in achieving your financial goals. Investment accounts are like the different compartments in your financial toolbox. Each account is tailored for a specific financial goal, like a Registered Retirement Savings Plan. Investment products on the other hand, are like the individual tools you carefully select and place into these compartments.
Let's dive more into the different investment accounts and products below.
Depending on your goals, you have a range of investment accounts available to you. These include Registered Retirement Savings Plans (RRSPs) for retirement, a Tax Free Savings Account (TFSA) for versatile savings, and a Registered Education Savings Plan (RESP) for educational expenses.
Registered Retirement Savings Plan (RRSP)
A great way to save for retirement.
There is a limit on how much you can contribute each year – refer to your RRSP deduction limit statement on your Notice of Assessment from the Canada Revenue Agency.
Variety of investment products (tools) including mutual funds, stocks, and bonds to choose from based on your risk appetite.
Any contribution you make, you can claim as a tax deduction on your income taxes. You won’t be taxed on this money until you withdraw it. The ideal time to withdraw these funds is in retirement when your income is lower, meaning fewer taxes you’re having to pay on your income.
Registered Education Savings Plan (RESP)
A perfect way to help you save for your child’s (or grandchild's) education.
Federal government grants and incentives are available to help your savings grow faster.
There is a lifetime maximum of $50,000.
Earnings with an RESP aren't taxed, helping you grow your savings quicker.
Tax-Free Savings Account (TFSA)
Great way to save for just about anything!
Use to save for short- and long-term goals including weddings, emergencies, vacations, retirement and more!
A variety of investment products (tools) to choose from including stocks, bonds, and mutual funds.
100% tax-free – you don’t pay taxes on money earned or withdrawn.
Unused contribution room is carried over to the next year, increasing your annual limit.
When choosing the right products (tools) for your accounts (financial toolbox), it's important to consider what your goals and risk tolerance are. Products include stocks, exchange traded funds (ETFs), bonds, mutual funds and more.
Offer diversification as they invest in several different assets, reducing your risk.
Short- or long-term marketplace investment options available.
Variety of options available for all risk appetites – low, balanced or high growth.
Offer an affordable way to invest in a wide array of stocks.
Represent a partial ownership of publicly traded company. The more shares you buy, the more stock you have in the company.
Potential for higher returns over the long-term.
Invests into a portfolio of other investments, similar to a mutual fund.
Prices fluctuate all day as ETFs are bought and sold on the stock market.
These are just a few of the investment accounts and products available to you. To explore these options further and discover which one may align best with your financial goals, visit our comprehensive guide on investment accounts and products here.
Remember, when it comes to navigating the world of investments, you don't have to do it alone. As you're an expert in your field of work a financial advisor or wealth advisor is an expert in investing. Contact us today to take the next step towards achieving your financial investment goals.