TFSA vs RRSP vs FHSA - Where Should You Invest Money To Buy A House?
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- เผยแพร่เมื่อ 2 ส.ค. 2024
- We're currently saving our money so that we can buy a house - ideally, a rental property in the short-term, and then a primary residence one day in the future.
In Canada, there are a lot of different ways to save up for a house - you could use a high interest savings account, you could use a TFSA (Tax Free Savings Account), an RRSP (Registered Retirement Savings Plan) via the First Time Home Buyers Plan, or you could use an FHSA (First Home Savings Account).
But... how do you know which one of those options you should use? That's what we're covering in this video! We'll cover how each option works, and the pros and cons for each account specifically relating to buying a house.
Check out the CDIC website for more information - www.cdic.ca/
*Correction (timestamp 14:42) - An amount that is transferred directly from your FHSA to an RRSP (or RRIF) will not impact your unused RRSP deduction room (meaning you wouldn't have to take the money out as taxable income).
0:00 Where should you save money to buy a house?
0:53 High Interest Saving Accounts (HISA)
4:23 Tax Free Savings Account (TFSA)
7:54 Registered Retirement Savings Plan (RRSP)
11:51 First Home Savings Account (FHSA)
15:09 How is your money protected when saving to buy a house?
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Some People look at the FHSA max contribution limit of 40,000 and are instantly cynical about it, but when you add in the tax free capital gains of that 40k and the fact that a hypothetical life partner can also contribute 40k, PLUS the RRSP max contribution of 60k (potentially 120k) PLUS a potential contribution from your TFSA, you can pool together a substantial down-payment on a home
Yes, so true 😊 There are many great options now (especially with the increased limit of $60k for the RRSP First Time Home Buyer's Plan). The bigger issue now becomes finding an affordable house!
Yes that’s true. You can potentially save up around $280k with a combination of 2 FHSAs & 2 RRSPs including the tax returns for investing in those accounts. You just need $200k.
It’s good to segment accounts for individual purposes as both the RRSP and TFSA are great accounts for tax free growth for long term, retirement investing. It’s also not a great thing when you’re draining a majority of your retirement accounts in your late 20’s and well into your 30’s (which is the Canadian reality) to buy an overpriced home and think you can start investing for retirement from scratch later in life when the cost of home ownership from there forward is taking up most of your free cash flow. Home ownership is a dream for many but being mortgage and house poor is a reality for many as well.
My husband and I just met with a financial advisor for the first time and opened a FHSA thanks to the help of this video. Hoping to hit the $8,000 a year along with our RRSP contributions we might have a house in 3-5 years!
Hey! Just paid off all my debt and started taking my finances seriously at 27. You guys are extremely helpful. Thank you!! 🙏🏽
Amazing!! We’re so happy to hear that 🥳
Couple key points that weren't covered:
HISA: you need to pay full marginal taxes on that interest rate. So the interest of say 4% is closer to 2.5 - 3% after tax (you'll need to pay $300 to $400 in taxes on that $1000 example) .
Inside the TFSA, RRSP, and FHSA: You don't have to "invest" in stocks in these accounts, you can still hold HISA like investments such as the high interest savings ETFs. These will only increase in value over time and these currently give ~4.7% tax free. So even for 0-2 year time frame, these accounts still make sense.
Thanks for your comment 😊
high interest savings ETFs? looks like I will have to watch another youtube video
@@doubleup4461 Two ETF examples to help you start your research: Horizons CASH, Purpose PSA.
Great video! I watched it with my teens! I just added that they could invest all 3 accounts in a high interest Savings account if they wanted to depending on their individual situation and the purpose for their money 😊
Amazing, we're so happy to hear that! 😊
Thanks for this video, and your clear explanations of these items!
So glad you found it helpful! 😊
Your videos are educating me . Thankyou so much .
We’re happy to hear that! 😊
Another great video! Along for the journey towards home ownership 🍊
Thank you! 🙏🏿🙌🏻
Thank you for going over the fundamentals.
Of course! 😊
I just found your channel today and I'm loving it so far.
I'm new to all of this any just have a couple questions.
I'm looking to buy a house in about 3 years, what's the best way to invest/save money in order to take that money out in 3 years?
I make a pretty solid wage(125k+ annually) so I have the opportunity to put a lot of money away. I currently only have investments in RRSP's.
Yesss thank you!
Of course! 🥳
Hi Steph & Den, I love how you make money concepts so simple. Love your work! I have a question about withdrawing money from TFSA: let's say by December 2024 I went from $10000 (original deposit) to $12000, does it make a difference if I take out the $2000 I earned and then re-invested it the next year 2025? The withdrawal is for no reason at all. Will this get me more contribution room for 2025? Thanks!
Currently using an FHSA and TFSA, but I am in the process of transferring funds from my TFSA to RRSP when my GICs mature to take advantage of the tax benefits of that account since I’m closing on a precon home at the end of this year.
Thank you for sharing! That's great 😊
is the FHSA a good account if i want to buy land to build a home oppose to just buying a house thats already built?
Hello and good day. Great informative video! I have a question. Lets say you have contributed $24000 on your FHSA (for example: opened from
2023-2026). Lets say that for the 5% down on a house, you only need $17500. What happens to the $6500? Does it get tax? Or can it go back your other account free of tax?
Which area are you guys thinking of buying your investment property? my partner and I are actually looking over the east side of Toronto, onto the Durham region due to much more better affordability and the high projection of population growth
I appreciate the refresher on these accounts.
I'm confused tho. I've seen videos from others in the past and they said:
- you cannot combine FHSA and RRSP's HBP when buying your first home.. ?
- also after 15 years of not using the money inside FHSA, it can go to RRSP and will NOT affect contribution room even if you've already max out RRSP.. ?
I'm too lazy to do my own research that's why I rely heavily on TH-cam ed.
You can use both the funds in a FHSA and your RRSP at the same time for a down payment so long as you meet the criteria (and it’s pretty well the same for both) of a first time homebuyer without either being taxed on withdrawal it’s just your RRSP has to be paid back over a period of 15 years the FHSA does not. The FHSA can be rolled over into your RRSP without affecting its contribution room otherwise it’d have to be cashed out and taxed after it’s been open for 15 years if you never used it for a qualified home purchase (the government never lets you get a tax deduction without getting some of that money back lol)
TFSA Best for any savings investing undisputed once that TFSA is maxed then look into other options like rrsp fhsa cash accounts etc
You’re leaving money on the table if you’re not investing in fhsa and rrsp.
@@ludo_ yeah dude ... Also I was said max your TFSA before looking at those other options
FHSA is like an RRSP and TFSA put together … grows tax free and you can write it off in taxes
We're in an awkward place where we're getting married this year (mostly paid for by family) and going on a honeymoon (paid for by ourselves and gifts), and next year we want to try for a baby. Will probably want to buy late 2025 or 2026. Sounds like HISA is still the best way to go in our situation? We were thinking of still maxing out the FHSA, which we know has a bit of risk involved as it can go down, but we are ok with that. Thoughts?
Hey Ashley! First off, congrats! 🥳 Also, you can still open an FHSA, but instead of buying a long term investments, you could purchase a GIC. EQ Bank has a 1 year GIC with a rate of 5.35% (less risky because your money is guaranteed).
Also check out our recent ‘I Opened an FHSA’ video - we talked more about GIC’s as a potential option.
@@stephandden Awesome, great information! I'll check it out. Thank you so much! 💓
QUESTION - if you put money in your TFSA then withdraw to buy a house - do you lose your contribution room?
No I get that withdrawal space back next year
...
Do you guy's have a video about credit cards coming soon
We do! It should be coming out within the next few weeks 😊
@@stephandden Yes please, I'm tired of getting scene points, i need better options LMAO
You can have a HISA in a TFSA or FHSA! Those accounts don't have to just be for investing. If you have contribution room available in these accounts, it doesn't make sense to save money in a HISA that is not in a TFSA or FHSA. You would be losing out on the tax advantages if you did this.
If you're planning on buying a house in the next couple years, you should still open a FHSA and contribute to it (you can buy a high interest savings ETF in the FHSA), so you can use the contributions to reduce your taxable income and get a bit of tax-free growth before you purchase.
Yes, you can! We personally believe in investing within the investment accounts that we have available (as many people unknowingly don't use these accounts to their full potential).
Thanks for your comment 😊
Two things are not correct here: 1. You don’t need the room to transfer FHSA into RRSP and 2. Non guaranteed con of the registered accounts is not true since technically you can buy GIC in them. Hope the information would be more accurate
Hi! Yes, noted regarding point number 1 - we’ve responded to other comments stating that and made an update in our description box!
Regarding your second point - yes, as noted later in the video, deposits held in Canadian or foreign currency, GIC’s and other term deposits are covered by CDIC protection, but other investments are not (including ETFs, stocks and bonds, etc), meaning that the account as a whole is not guaranteed, unlike a savings account. We hope that helps!
Thanks for your comment. 😊
I thought the first-time home buyer incentive was discontinued?
Yes, it was discontinued. But that program was brought to you by CMHC and no one could get access to it because of the rules they had in place (basically it wasn’t that good).
But the First Time Home Buyer Plan (Plan vs. Incentive) is still around and it’s a much better program. It’s likely what you’ve heard people using in the past. Hope that’s makes sense 😊
I thought they got rid of the First Time Home Buyers plan
You’re thinking of CMHC’s First Time Home Buyer Incentive - which the majority of people couldn’t access, hence why they got rid of it.
The RRSP’s First Time Home Buyer Plan is still here for anyone who wants to use it 😊
If you earned interest on your TFSA and that interest makes your exceed your contribution limit, will you be liable for anything. Note your deposits didn’t exceed your limit the interest earned did
No you’re not. The only thing that you need to keep track of and not exceed with regard to your TFSA are your contributions (so how much you’ve put it - not how much it’s grown).
If you invest your money or you earn interest and it grows - that’s great!! You don’t need to worry about that though. Check out our TFSA Explained video for more 😊
Why doesn't anyone talk about the tax implications of having your money in a HISA
I have the same question
People you have to pay taxes if you have money in a HISA
Not in canada
We have a lot of other videos that aren’t Canadian specific 😊
first comment😅
So quick! 😊
This was so helpful! Thanks guys 🫶🏼
So glad you found it helpful! Thanks for watching 😊
Great vid 🤍 It’s good to know what different savings accounts are
Thank you so much! 😊