Investment Accounts | Money Club

Types of Investment Accounts

When it comes to managing investments, financial institutions offer two very different options for investors:

Full service investing: get advice and help from them.
- For this option, contact your financial institution.
Self-directed investing: you make all your own decisions.
- To open an account with RBC, click here

You need to decide which option is the best fit for you.

Link to article: Why Some Canadians Choose DIY Investing Over Financial Advisors - convenience, control and lower costs.

There are two kinds of self-directed accounts:

Registered - investments grow tax free
- TFSA, FHSA, RRSP and RESP
Non-registered - investments are subject to tax
- Regular investment account

Each of these account types are not a product that you buy. Instead, they are like a bucket. In this bucket you can hold different types of investments: stocks, bonds, index funds, GIC's etc.

Self-Directed Account

This is a type of account where you:

Make the decisions as to what investments to hold.
Do the work - place the order to buy the investments.

In BC you need to be 19 years old to open one.

What is the benefit?

Much lower costs (expenses). This gives you the opportunity to earn a higher return over time.
2% per year in savings grows into a significant amount over a lifetime.

What is the problem?

You make the decisions and do the work.
You will need to learn the basics. This will take time.

You should choose the self-directed option only if you are:

Interested in personal finance and motivated to learn more.
Committed to building and executing a financial plan.

Build out a network: It helps if you have other family members (or friends) that you trust who are knowledgeable.

A Review of the 4 Types of Registered Accounts - TFSA, FHSA, RRSP and RESP

Tax Free Savings Account - TFSA

Designed to help you save and invest.

Are contributions tax-deductible? No
Do investments grow tax-free? Yes
Are withdrawals taxable? No.
How much can you contribute? All Canadians have the same contribution room each year ($7,000 in 2026).
Unused contribution room in one year can be carried forward and used in future years.
It is best utilized as a permanent investment account (not a temporary savings account). Let compounding work.
To learn more click here

First Home Savings Account - FHSA

Designed to help you save for your first home.

Are contributions tax-deductible? Yes
Do investments grow tax-free? Yes
Are withdrawals taxable? No (if used to buy a first home)
How much can you contribute? $8,000/year or $40,000 over a lifetime
If purchasing a first home with a parter, both can take advantage of the program.
To learn more click here

Registered Retirement Savings Account - RRSP

Designed to help you save for your retirement.

Are contributions tax-deductible? Yes
Do investments grow tax-free? Yes
Are withdrawals taxable? Yes
How much can you contribute? 18% of your employment income in the previous year.
Check your RRSP contribution room on your annual notice of assessment from Canada Revenue Agency.
To learn more click here

Registered Education Savings Plan - RESP

Designed to help you save for your kids post secondary education.

Are contributions tax-deductible? No
Do investments grow tax-free? Yes
Are withdrawals taxable? Yes, but as income for the child.
Government match? Yes. Equal to 20% of your annual contribution, up to a max of $2,500/year. If you contribute $2,500 the government will contribute $500 in free money.
Keep it simple: More than one child? Set up a group RESP.
To learn more click here

Where Should Your Money Go First? And Then After That?

What account to use? And in what order?

Here is a video with some suggestions:

Employer matching RRSP & RPP
Credit Card Debt
Emergency Savings Fund
RESP - Government grants (first $2,500)
FHSA
TFSA
RRSP
RESP - No more government grants

Of course, what you do will depend on your specific situation.

How to calculate your TFSA contribution room

Your TFSA contribution room is the maximum amount that you can contribute to your TFSA.

Example 1: A person who turned 18 years old in 2009 or earlier would have a total of $109,000 in TFSA contribution room.

Example 2: A person who turned 18 years old in 2022 would have a total of $33,500 in TFSA contribution room ($6,000 + $6,500 + $7,000 +$7,000 + $7,000).