What to Do with Your Pandemic Savings

October 2021

Throughout the pandemic, Canadians collectively have been spending less and receiving more money than ever from government support programs.

As a result, we’re saving like never before.

In fact, Canadians amassed $212 billion last year, versus $18 billion in 2019, according to Statistics Canada. That works out to $5,574 per Canadian on average in 2020, compared to $479 in the previous year.

For many, the question now is, what to do with their unexpected savings?

According to Equifax Canada, a good number have already decided how to spend at least some of their funds. The credit rating agency reports that credit card balances are down, fewer people are behind on payments and credit scores are up.

Paying off any high-interest debt is a great idea. Bravo to those of you who’ve done so!

Now, depending on how much money you have remaining, you might consider putting extra payments on your mortgage, doing home renovations or rewarding yourself with some time off and travel.

And, of course, you know my view: You should always keep an eye on your most important financial goals. With this in mind, you might consider directing a portion of the funds towards your retirement savings.

And if you have school-age kids or grandkids, another option is to invest a part of the money into a Registered Education Savings Plan (RESP) to help pay for their post-secondary education.

Signature Service Account

Our Signature Service Account gives you access to all the services, advice and investment options you need to meet your financial goals.

RRSP vs. TFSA: Which Is Better for You?

Many people are uncertain whether to choose a Registered Retirement Savings Plan (RRSP), a Tax-Free

Savings Account (TFSA) or a combo of both to save for the future.

Regardless of what you decide, one of the best things you can do is save consistently. I recommend setting up a pre-authorized contribution plan and putting a portion of your income aside each month.

Eventually, you can increase your contributions with a goal to max out both accounts.

Tax advantages

Both the RRSP and the TFSA offer tax advantages that can help accelerate retirement savings. Still, you may find one option more suitable, depending on your circumstances.

In general, lower-income earners (under $45,000) will benefit more from a TFSA. While not specifically designed for retirement savings, TFSAs can be used for this purpose and make an excellent complement to an RRSP.

If you’re saving for retirement, an RRSP is a great choice. With an RRSP, you defer paying tax from your peak earning years to retirement, when your income and tax liabilities may be lower.

Which is best?

Determining which is best for you requires a complete review of your personal circumstances. Ultimately, it would be best if you aimed to have both an RRSP and a TFSA, spreading your savings across both accounts.

With each step towards retirement, you can adjust your plan to reach your goal. Looking for more ideas to help you plan your retirement? We encourage you to talk to us.