7 Accounts You Must Have in Canada

Do you know that 45% of Americans and Canadians live paycheck to paycheck and have less than $1,000 saved in the bank? Also, one in a third of Canadians have no retirement savings before the age of 35.

Why do you need 7 accounts? It's not only because you can earn extra money but also because you should have different accounts for different goals.
These 7 accounts, it's a wise way to manage money toward your brilliant future.

7 accounts: 

1. Chequing Account
2. HISA -    High-Interest Savings Account 
3. GRRSP - Group Registered Retirement Savings Plan 
4. RESP -    Registered Education Savings Plan 
5. TFSA -    Tax-Free Savings Account 
6. FHSA -    First Home Saving Account  
7. RRSP -    Registered Retirement Savings Plan 

My personal Chequing Account: CIBC.

1. Chequing Account 

I use a CIBC Chequing account.

Chequing account only for day-to-day expenses. 

Do NOT save money in this account with 0% interest rate.  Also, not recommended to save money in a regular savings account with 0.1-0.5% ONLY. 

Try not to save your money in the top 5 banks. Always remember that, place your money in a more valuable High-interest savings account, and let your money work for you.

Saving Accounts

2. HISA ( High-Interest Savings Account)

Your money should always be saved in HISA which offers 2.5%-6% interest rates. 

HISA should always be your savings account from online banks, not the regular savings account from the top 5 banks.

HISA is a good idea for saving at least $1,000 for emergency use and also at least 3-6 months of household expenses because that money should be kept in an easily accessible account. 

HISA will be a short-term saving need.  Only put your emergency fund into easily accessible investments, like a HISA or TFSA account. Fixed-term investments and guaranteed investment certificates (GICs) should be avoided.

In my case, I opened 2 HISA. One for only Emergency Fund. Another one is for day-to-day and short-term expenses, like credit card bills, transportation, mortgages, etc.

My personal HISA account:

1. Simplii (Highly recommended)
2. EQ
3. WealthSimple
4. Neo

For example: 

If you have around $20,000, you place the money in:

CIBC Saving Account (0.5%): Receive $8 monthly interest ONLY. 

Simplii Saving Account(6%): Receive $100 monthly interest.

Why not get FREE MONEY from Simplii?

Simplii Financial is owned by CIBC.
It means CIBC is a physical bank. Simplii is an online bank.

  Get to know Simplii 》

Investing Accounts

3. RESP (Registered Education Savings Plan)

RESP is a long-term savings plan to help people save for a child's education. If you don't have kids, skip this account.

Contributing to an RESP allows you to grow your savings tax-free. 

Since this money is for a child, the taxable portion of the withdrawal will be allocated to that child, at a much lower tax rate than yours. 

Once your child is enrolled in a post-secondary program, they can access the money from their RESP.

If your budget is tighter after you have children, TFSA contributions may be a better option for you. Unlike an RRSP, your TFSA savings account allows you to withdraw anytime you want without tax penalties.

4. G-RRSP (Group-Registered Retirement Savings Plan)

Your employer matches contributions you make to your RRSP.  If you don't have a job or you are self-employed, skip this account.

The company where you work will match a percentage of your retirement plan, this is called employer match.

Maximize your Group RRSP matching benefits. This matching program incentivizes you to save more.

Once you register Grrsp program, your employer will automatically deduct your contribution from each paycheque. 

For example, when you put 6% of your income earnings into an RRSP account,  your company also matches 6% money towards your RRSP account. This is the type of savings worth prioritizing because it allows you to essentially increase your salary. 

Let's do the calculation, say you earn $70,000 a year before tax. If you’re saving 6% of earnings to your RRSP which is $4,200, your company would be also adding 6% which is $4,200 into your RRSP account. That’s a total of $8,400 in RRSP savings a year with just $4,200 on your own money. Pretty good deal, eh. 

This matching program it’s basically free money,  your employer is right there adding extra savings alongside you.  So please allow yourself to take this free money.

5. TFSA (Tax-Free Savings Account)

TFSA is my favorite savings account. All the money you make in the TFSA is tax-free and can be withdrawn anytime.

TFSA is not just a savings account, but also an investing account. 80% of people just put cash in the TFSA account. Don't you know that you can buy and sell stocks in a TFSA account to boost your savings? A low-cost index ETF is always my highly recommendation for long-term investing. 

ETF is a basket of stocks. VFV & VOO ETF tracks the S&P 500 index fund, which means you own the potions of the 500 biggest American companies stocks.  S&P 500 averages about 10% annualized returns over decades.

VFV is offered in CAD dollars and is listed on the Toronto Stock Exchange.

VOO is offered in US dollars and is listed on the New York Stock Exchange.

If you are in the USA or you have US dollars in Canada, you can buy VOO ETF. 

All you need to know about the power of TFSA 》

VFV 2013-2023 Performance 

The chart shows that invested $7,000 VFV in 2013, you got a total $37,001 capital return in 2023, including $3,300 dividends. In just 10 years, the money grew by around 500%. Did you see the power of long-term investing?

6. FHSA (First Home Saving Account)

FHSA is only for First Home Buyers.  If you already bought and live in that house, skip this account.

Annual Contribution: $8,000 for a total of 5 years which means a lifetime maximum of $40,000 in contribution room.

FHSA combines the benefits of  TFSA and RRSP.  When contributing, tax-deductible like RRSP. When withdrawing, tax-free like TFSA.

In my case, I am investing ETFs in FHSA to build a qualifying first home tax-free in the future.

7. RRSP (Registered Retirement Savings Plan)

Most companies offer Group RRSPs, but if yours does not, you can enroll in an individual RRSP.

The money you put in your RRSP is not taxed, this money is tax-deferred. And money will grow tax-free until it’s time to retire. 

Saving for your retirement should be one of your long-term financial goals.

Banks and brokerages Recommendations:

Chequing Accounts:

➣ CIBC: New to Canada? Open a CIBC account and get a $50 cash-back bonus.

HISA- High Interest Saving Accounts:

➣ Simplii: 6% Promotional interest rates for 5 months. How to open a Simplii bank account and get up to $600 》

➣ EQ: 2.5% non-promotional interest rates forever. How to open an EQ bank account and get $25 》

➣ Neo: 4% non-promotional interest rates on every dollar forever. Open a Neo account and get up to a $25 bonus.

➣ WealthSimpe Cash: 4% non-promotional interest rates forever. How to open a WealthSimple account and get $50 》

Investing Accounts

➣ WealthSimple Trade: The most beginner-friendly platform to use.

• If you are a beginner in investing, go for WealthSimple.
• $0 trading fee. 
• Get started investing with as little as $1.

➣ Questrade: It is Canada's largest trading brokerage.

• If you prefer trading more US-listed stocks and ETFs, like Apple stock or VOO ETF, go for Questrade. 

How to make sure your money is in the right account? 

Which one to choose to start investing in? 

These are the charts for you to understand those 3 accounts.

Charts from WealthSimple

My personal investment account priority is TFSA→GRRSP→FHSA→RRSP.

PLEASE DO NOT JUST PUT CASH IN THE Investing Accounts.  

Buy some value products to let your money grow, like VFV ETF.

Summary of 7 accounts you must have in Canada: 

1. Chequing Account: For day-to-day use only.
2. HISA: At least 6 months of Emergency fund in HISA.
3. GRRSP: Maxed out company matching benefits.
4. RESP: Save for your children's education. 
5. TFSA: Maxed out TFSA contributions each year. Withdraw anytime Tax-Free. 
6. FHSA: Maxed out FHSA contributions each year. For first home buyer use. Earnings are tax-free and deposits are tax-deductible.
7. RRSP: Most companies offer Group RRSPs, but if yours does not, you can enroll in an individual RRSP.

The earlier you start to manage money via these 7 accounts, the faster seeing money grow, that's called the miracle of compound interest.  

What is compound interest?

However, don’t be disappointed by being late to the saving action because "The most difficult time comes when we can no longer change times for money middle ages, health, and other reasons. Then, our income stuck."

If you have a retirement plan and stick to it, you’ll be surprised at what you can achieve and how much wealth you can build throughout your life, so just get started.

First, get smart with your money by signing up a HISA 》

In the next article, I will share how to buy stocks and ETFs in WealthSimple trade step by step.