Not sure what to put in your RRSP and TFSA? Make contributions anyway


While you decide what investments to buy, registered savings accounts pay you interest on your cash.

Not sure what to put in your RRSP and TFSA? Make contributions anyway

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If your financial goals include putting more money into your registered retirement savings plan (RRSP) and tax-free savings account (TFSA), here’s a strategy that can help: making year-round contributions to high-interest registered savings accounts.

Whether you’re a saver or a stock picker, this simple strategy can help you max out your RRSP and TFSA contribution room every year—even if you haven’t decided how to invest the cash.

How to grow your savings faster

Money grows faster in tax-advantaged accounts. Not only do you save on taxes, but your savings compound over time.

RRSPs and TFSAs are two of the easiest accounts Canadians can use to benefit from tax-advantaged investing. Interest, dividends and capital gains are not taxable when your investments are held in these accounts. Plus, RRSP contributions earn you a tax deduction.

Not sure which investments you want to hold in your RRSP? No problem—while you decide, you can put money into a high-interest RRSP savings account, and it counts as an RRSP contribution for the tax year in which it was deposited. For the 2022 tax year, you can make contributions until March 1, 2023.

TFSAs have no set deadline, but contribution room increases every year on Jan. 1. (The past few years, contribution room has been $6,000 annually, and the 2022 total lifetime contribution limit is $81,500 for those born before 1991.)

Even if your long-term plan is to buy guaranteed investment certificates (GICs), stocks, exchange-traded funds (ETFs), mutual funds or other eligible investments, contributing to a high-interest RRSP or TFSA savings account now will help your savings grow while you’re making up your mind. And by setting aside money with automatic contributions, you’ll be ready to take advantage of market dips and new investment ideas.

Saving with automatic contributions

For most people, saving smaller amounts year-round is easier than contributing a single larger lump sum. To make it even easier, you can set up automatic payments from your main bank account into your RRSP or TSFA. This “set it and forget it” approach helps you take full advantage of your contribution limits. Most financial institutions offer automatic transfers, often at no charge.

For example, with EQ Bank, you can set up recurring transfers weekly, monthly or at whatever frequency you choose. Consider timing the contributions to coincide with your paydays or other regular income. You can stop the transfers or change the timing or amount any time online or through the bank’s mobile app. And EQ Bank has zero fees for these services.  

Shop for the best interest rates

Rates on high-interest accounts vary widely, so shop around. Virtual banks like EQ Bank often offer higher rates than traditional bricks-and-mortar banks. EQ Bank’s high-interest RSP Savings Account and TFSA Savings Account have no monthly fees, and they’re both on MoneySense’s list of the best savings accounts in Canada for 2022.

Ready to invest?

When you’re ready to make longer-term investments in your TFSA or RRSP, you can transfer funds directly from your registered savings account to a registered GIC or a trading account.

If you’re investing in GICs, you’ll often find the best rates at virtual banks like EQ Bank.

For stocks, ETFs, mutual funds or other securities, you can transfer funds from registered high-interest savings accounts to registered investment accounts of the same type. For instance, money in a high-interest TFSA savings account can be transferred to a direct investing TFSA without triggering tax consequences.  

Mind the contribution rules

If you hold more than one RRSP or TFSA, make sure your combined contributions do not exceed your limits for each type of account. Also, be aware that money withdrawn from an RRSP is considered taxable income for the year it is withdrawn.

With TFSAs, generally you can withdraw money at any time without tax consequences. EQ Bank offers unlimited withdrawals with no fees. Just be careful not to over-contribute to your TFSA, especially when replacing withdrawals, or the CRA will charge you a 1% penalty fee per month on excess contributions.

Start growing your savings today

Opening a high-interest RRSP or TFSA savings account online is quick and easy. Consider EQ Bank’s “zero paperwork” signup, which means you can get started with an account in just a few clicks. No lineups, no waiting on hold, and best of all—no monthly fees.

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