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Homeowners' Guide to Savings Accounts: Exploring Your Options

By Andrew Goetz

Financial Advisor, O’Farrell Wealth & Estate Planning | Assante Capital Management Ltd.

As we’ve discussed in a prior article (See Tax-free First Time Home Savings Account), the Canadian Government has created an innovative way to save money for first time home buyers. It's called the First Home Savings Account (FHSA) and you are eligible if:


- You are between 18 and 71 years of age

- Are a current tax resident of Canada

- Have not lived in a home you or your partner have owned for the past 4 calendar years

- The objective for opening the account must be to save for a qualifying home in Canada


Individuals can contribute to these accounts to the tune of $8,000 dollars per year and $40,000 over a lifetime. FHSA can be a huge advantage for the average person looking to buy a home. This fund sees “the best of both worlds” meaning that contributions to the FHSA are deductible from your yearly income tax and investment growth within the account is also tax free.


How does this compare to TFSAs and RRSPs?


Well, it's pretty interesting. Wealth inside your TFSA grows tax free to a maximum contribution of $88,000 lifetime (as of 2023). The problem is you cannot deduct TFSA contributions from your income tax.


From an RRSP perspective, any contributions up to your personal yearly limit can be deducted from your income tax. However, any growth inside the account will be taxed upon withdrawal.


That’s where we get the idea of the newly introduced FHSA being the ideal combination of both worlds. It combines the benefits of a TFSA and an RRSP into one account. Of course, a tool this powerful has drawbacks— the contribution stipulations and limits discussed earlier in the article.


So, the question is, where does one put their money?


These three accounts are designed to work together to provide you with more contribution room, more tax savings, and more opportunities for investment growth. However, the answer is that each person's situation needs to be assessed accordingly.

Are you planning to buy your first home or haven’t owned one in 4 years? You’ll want to reap the benefits of the FHSA. Unfortunately, if you already own a home, you won't be eligible for the FHSA. In that case, an investment strategy that fits your income, risk tolerance, and time frame should be implemented in your RRSP and TFSA accounts.


Investing in a home is one of the biggest financial decisions you'll ever make. With so many options available, it can be overwhelming to figure out which path is right for you. That's why it's important to work with a financial advisor who can help you navigate the complex world of home buying and investing. They can help you decide which options are right for your unique financial situation and long-term wealth goals.


We welcome questions so please reach out! See our ad in this week’s North Dundas Times and follow us on Facebook @OFarrellWealth.


Andrew Goetz is a Financial Advisor with Assante Capital Management Ltd. The opinions expressed are those of the author and not necessarily those of Assante Capital Management Ltd. Please contact her at 613.258.1997 or visit ofarrellwealth.com to discuss your circumstances prior to acting on the information above. Assante Capital Management Ltd. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.

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