TFSA VS RRSP

Hello poddies!!

It is financial literacy month on the blog!! just kidding, Ive been reading wealthing like rabbits which obvi spurred my writing of this blog. This book was gifted to me by the lovely Tobias Murphy. I just love the author of this book, I should probably get some more books by him.#robertrbrown. When I first started reading the book, I was so bored, like Mann what's rabbits got to do with this? but the answer is truly everything. ANYWAY...

What is a TFSA?

A TFSA is a tax free savings account, any money you put into this account has already been taxed. so basically putting your money into a tfsa does not actually reduce your taxes.. that was a misconception I had before reading wealthing like rabbits. One benefit of a TFSA is that your money grows in there tax free ( but only as long as it is in there) The biggest way your money grows in a TFSA is through the power of TIME and COMPOUND INTEREST. (let me know if you want me to break those down farther). Even as an international student, it is wise to have one of these, as its blatant stupidity to have money sitting in your account when you could earn interest from it. (sorry not sorry, I know u still love me)

What is a RRSP?

A RRSP is a registered Retirement Savings Plan, any money you put into this account is deducted from your taxable income. This inadvertently means you end up paying less income tax every year that you contribute to your RRSP. The more money you put into your RRSP the less tax you pay. Again, once inside your RRSP your money grows through the power of TIME and COMPOUND INTEREST. A key thing to note here is you do not pay any income tax on the principal contribution or interest earned on your savings until you take the money out of your RRSP.

Check your notice of assessment with the Canada Revenue Agency to know your contribution room, unused room can be carried forward.

Which one is best?

Ok... both are clearly great options for saving but here is the gag. you need to start saving for retirement, whether you are 18 or 30.. It is not something that is so far away, and the later you start preparing for it, the less money you would have by the time you retire. I know one could argue that we do not know if we will live to retirement.. but I can also argue that since we don't know... more is better. In other, wards, would you prefer to have 750,000$ saved or 750$..

Which one would I choose?

TFSA.. as I get to save for retirement now and reduce my retirement tax burden at the same time..

I am not a financial advisor, but I suggest having both depending on your specific needs.

Millennials Guiding Millennials,

Written by Alejandra Edwards,

RRSP~ Don't pay tax now, grows tax-free inside, pay taxes later. ~

TFSA~ Pay taxes now, grows tax-free inside, don't pay tax later~ Robert R. Brown.