If your financial goals include increasing contributions to your registered retirement savings plan (RRSP) or your tax-free savings account (TFSA), a reliable strategy is to make steady, year-round deposits into high-interest registered savings accounts. This approach keeps your cash working for you inside tax-advantaged accounts while you decide on longer-term investments.
Whether you prefer saving in guaranteed products or investing in the market, contributing regularly to a high-interest RRSP or TFSA savings account can help you use your contribution room fully each year—even if you haven’t chosen specific investments yet.
How to grow your savings faster
Tax-advantaged accounts help money grow faster because interest, dividends and capital gains earned inside RRSPs and TFSAs are sheltered from tax. RRSP contributions also reduce taxable income, which can lower the tax you pay in the contribution year. This combination of tax savings and compounding returns can make a meaningful difference over time.
If you’re unsure which investments belong in your RRSP, you can deposit money into a high-interest RRSP savings account while you research options. Deposits count as RRSP contributions in the tax year they’re made; for example, contributions for the 2022 tax year could be made until March 1, 2023. TFSAs have no filing deadline and contribution room increases on Jan. 1 each year. In recent years, annual TFSA contribution limits were commonly $6,000, and the 2022 total lifetime contribution limit was $81,500 for individuals born before 1991.
Even if your long-term plan is to buy GICs, stocks, exchange-traded funds, mutual funds or other eligible investments, placing funds in a high-interest registered savings account keeps them safe and growing while you finalize your strategy. Regular automatic contributions also position you to take advantage of market opportunities when you’re ready to invest.
Saving with automatic contributions
Many people find it easier to save with smaller, regular contributions rather than a single large deposit. Setting up automatic transfers from your main chequing account into your RRSP or TFSA makes saving habitual: it’s a “set it and forget it” habit that helps ensure you use your allowed contribution room every year. Most banks and online providers offer recurring transfers at no charge, and you can usually pause or change the schedule online at any time.
Timing contributions to align with paydays or other regular income helps with budgeting. If you automate weekly or monthly transfers, your savings grow incrementally and benefit from compounding interest in a high-interest savings account while you decide where to invest next.
Shop for the best interest rates
Interest rates on high-interest registered savings accounts vary, so compare providers. Online or virtual banks often offer higher rates than traditional branches because of lower overhead costs. When you compare accounts, look at fees, withdrawal rules and ease of transferring funds to other registered investment products. Accounts with no monthly fees and unrestricted electronic transfers can make it simpler to move money into GICs or investment accounts later without unnecessary costs.
Ready to invest?
When you’re ready to make longer-term investments, you can transfer money from a registered high-interest savings account into compatible registered investments without triggering tax consequences—so long as transfers remain within the same account type. For example, cash in a high-interest TFSA savings account can be moved into a TFSA trading or investment account. Similarly, RRSP savings can be transferred to RRSP-eligible GICs or trading accounts.
If you prefer guaranteed returns, virtual banks frequently advertise competitive GIC rates. For self-directed investments like stocks, ETFs or mutual funds, transferring cash into a registered investment account lets you buy securities directly while preserving the tax advantages of the original registered wrapper.
Mind the contribution rules
Be careful not to exceed your combined contribution limits across multiple RRSPs or TFSAs. Over-contributing can result in penalties. Withdrawals from an RRSP are considered taxable income in the year withdrawn, and they can affect your tax situation. TFSAs generally allow tax-free withdrawals at any time, and many providers permit unlimited free withdrawals, but when you replace money you previously withdrew, watch your contribution room so you don’t accidentally over-contribute. The Canada Revenue Agency may charge penalties on excess TFSA contributions.
Start growing your savings today
Opening a high-interest RRSP or TFSA savings account online is usually fast and straightforward. Many institutions advertise simple, low-paperwork signups and no monthly fees. Before you open an account, compare interest rates, transfer options, fees and the ease of setting up recurring contributions so your savings plan is both effective and convenient.
Video: Benefits of opening a high-interest savings account
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Read more on investing:
- TFSA contribution room calculator
- TFSAs, RRSPs and FHSAs: 10 things you might not know
- How do I choose between a TFSA and an RRSP?
- How much should I have in my RRSP?
- Video: 4 things to consider before putting your money in a TFSA or RRSP
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