By baby I mean me. By first I mean not really. When I was about 25, I had about 16k in debt and 10k in a TFSA. Those were the days. I remember the advisor at the bank being impressed that I was thinking about saving money so young. HA. A few life changes later I was back to broke.
Now that I’m back in black, I am once again considering tucking away some money into something that isn’t a lame chequing account that not only doesn’t pay me anything, but charges me an exorbitant amount of fees. Originally I wanted to start storing money away in an RRSP but was quickly told not to.
What’s the difference between a TFSA and an RRSP?
Okay, I’m sure someone much smarter than me can probably give you the rundown (like here or here), but I’ll just tell you what the difference is in the context of moi. An RRSP offers a tax deferral, meaning you receive a hefty tax refund when you contribute the maximum. A TFSA, on the other hand, is more liquid and allows your investment to grow tax-free but isn’t eligible for an income tax deferral.
Why shouldn’t I opt for the RRSP?
Originally I wanted the RRSP because it is less liquid – I like my money where I can’t see it. I was told, however, that because my income is likely in the lowest bracket (womp womp) and because I still have education tax credits, I likely wouldn’t benefit much from the tax savings of an RRSP. Storing my funds in a TFSA and waiting until I know my total taxable income for the year is my best bet for now. In later years when I have a higher income and no education credits, I can use all of my RRSP room, including carry forward amounts to max out my RRSP.
From hereon out, I’m going to try to put about $1,000 into savings every month. Key word being ‘try.’ Yeah. As much as I wish I already had a ton banked away, I’m a saving ninja so hopefully I can make up for lost time with a healthy mix of working hard, frugality, and just plain ass-kicking.
Note: Because I don’t want to get sued for stealing images, because I don’t want traffic sent to my blog because of random titles of pictures I’ve innocently stolen, and because Jeremy scared me into thinking I’ll go to jail, going forward I will no longer be using images I stumble upon on the internet. Instead, I will be subjecting you all to my bad Photoshop skills as I practice. I promise I’ll have mad skill soon and won’t have to subject you to my awkward photo manipulations.
Do you have any tips for me and my savings plans? Do you like my awkward photos? Do you want me to stop?