RRSPs and TFSAs – Canadians are still confused
By NextHome Staff
February 20, 2020
February 20, 2020
We all know that saving for the future is a good thing. The message is, put a little money away every time you get paid. As simple as it may seem, many of us struggle to save or find better ways to do it.Savings rates in Canada have dropped dramatically in the last 40 years, raising concerns that we are not saving enough to have the future we dream about.For example, in the 1980s, our average savings rate was above 20 per cent. Back then, we saved 20 cents on every dollar we made. Fast forward to today, our savings rate has plummeted to less than five per cent, on average. New data from Statistics Canada reveals, in 2018, Canadian households had an average net savings of $852.Add this to a host of new ways to save and invest, and many Canadians are confused about what is the best investment path for them.A new survey from TD confirms that many (27 per cent) of Canadians still don't know the difference between the Tax Free Savings Account (TFSA) and the Registered Retirement Savings Plan (RRSP). The survey reveals that most know that these tax efficient registered accounts are a crucial part of their savings strategy, but they don't know how to use them."Regardless of whether you're planning for long-term retirement or for a shorter-term goal, RRSPs and TFSAs are two popular and important options to help grow your savings," says Jenny Diplock, associate vice president, personal savings and investing at TD."Many Canadians have both short- and long-term goals, so a mix of both TFSAs and RRSPs is often a good solution," Diplock adds. "However, it's important to understand the key differences between the two so you can feel confident about having the right plan in place to help meet your financial needs and goals."Thirty-five per cent of survey respondents say they don't understand the tax implications of a TFSA, and another 30 per cent say the same when it comes to an RRSP.