Types Of Canadian Investment Accounts: 2022 Reviews And Definitions
When it comes to investing, Canadians have a variety of options to choose from. From TFSAs and RRSPs to RESPs and more, the choices can be overwhelming. However, knowing which investment accounts are available in Canada is key to making an educated decision about your financial future.
In this review, we will discuss the different types of Canadian investment accounts, their features and benefits, as well as how to decide which one is right for you.
What Are Canadian Investment Accounts?
Unlike a savings account, a Canadian investment account is an easy and efficient way to invest your money with the aim of earning returns. Depending on the type of investment you make, these accounts can offer tax advantages, as well as other benefits such as diversification and compound interest.
For example, if you want to invest for retirement, you can open a Registered Retirement Savings Plan (RRSP). This will allow you to save money on taxes and invest for your future. Or if you are looking to save for your child’s education, a Registered Education Savings Plan (RESP) could be the right option.
Registered vs Non-registered Accounts
There are two main types of investment accounts in Canada: registered and non-registered. Registered accounts are those that have been approved by the Canadian government and offer tax-saving benefits. These include Registered Retirement Income Fund or Savings Plans (RRSPs), Tax-Free Savings Accounts (TFSAs), Registered Education Savings Plans (RESPs), and more.
Non-registered accounts are not recognized by the government, but still offer a variety of investments with varying levels of risk and return potential. They do not provide any tax benefits but may be useful for short-term investment goals such as buying a car or taking a vacation. Examples of these accounts include savings accounts, mutual funds, and stocks.
Canadian Registered Investment Accounts
We already mentioned a couple of the most popular registered accounts: RRSPs and TFSAs. But there are other types of Canadian investment accounts that you may want to consider as well.
Registered Retirement Savings Plan (RRSP)
An RRSP is a tax-sheltered investment account that allows you to save for retirement. Contributions to an RRSP are deductible from your taxable income and the earnings generated within the account are not taxed until withdrawal.
Tax-Free Savings Account (TFSA)
While similar to an RRSP, the TFSA is a non-registered account that allows you to save money without paying any taxes on the earnings generated. This makes it an attractive option for those looking for tax-free growth and access to their funds when needed.
Registered Education Savings Plan (RESP)
An RESP is a registered investment account designed specifically for saving up for your child’s post-secondary education expenses. Contributions made into an RESP are not tax-deductible, but they do grow tax-free and can be withdrawn at any time without incurring taxes or penalties.
Other Registered Investment Accounts
- Locked-in Retirement Accounts (LIRAs): A LIRA is a registered account that allows you to invest funds from an employer-sponsored pension plan. Unlike other investment accounts, withdrawals from a LIRA are subject to restrictions and you may pay taxes or penalties.
- Self-Directed RRSPs: A self-directed RRSP is a registered account that allows you to choose and manage your own investments. It offers greater flexibility than other accounts, but also carries more risk due to the lack of oversight from a financial advisor or institution.
Non-Registered Investment Accounts
The non-registered accounts discussed earlier include savings accounts, a mutual fund and stocks.
Savings Accounts
A savings account is a non-registered account that allows you to save money without incurring taxes on the earnings generated. These accounts are safe and offer a low risk investment option with relatively low returns compared to other investments such as stocks or mutual funds.
Mutual Funds
Mutual funds are professionally managed investment portfolios of securities (stocks, bonds etc.) that can be purchased through a registered financial institution such as an investment assets firm or bank. They offer investors diversification and access to professional management but may also carry higher fees than other investments.
Stocks
Stocks are a type of security that represents ownership in a company through the stock exchange and offer investors the potential for higher returns than other investments. However, they also carry greater risk and require more research to understand their performance before making an investment decision.
Top 5 Best RRSP Account In Canada 2022
- EQ Bank RSP Savings Account: Best Overall
- Tangerine RRSP Savings Account: Best for Low-Fees
- Motive Financial RRSP Savings Account: High-Interest RRSP
- Alterna RRSP eSavings Account: Perfect For Online Transactions
- CIBC RRSP Daily Interest Savings Account: Best For Daily Interest
Other Investment Options in Canada
Aside from investment accounts, Canadians have a number of other options they can use to invest their money. Here are some of the most popular alternatives:
Stocks
Stocks are shares of ownership in a company. When you purchase stocks, you become an owner of the company and therefore entitled to a portion of its profits. This is a great way for investors to benefit from the long-term growth potential of individual companies.
Exchange-Traded Funds (ETFs)
ETFs are investment portfolios that track an underlying index, such as the S&P 500. ETFs are popular with investors who want to invest in a variety of assets without having to actively manage their own investment asset allocation. They also offer lower management expense ratio fees than mutual funds and can be bought and sold on stock exchanges like other stocks.
Read more: Best Canadian Bank ETFs For 2022
Mutual Funds
Mutual funds allow investors to pool their money together and invest in a variety of assets, such as stocks, real estate investment trusts, bonds, and ETFs (exchange-traded funds). The fund manager will then manage the investments on behalf of all the investors. This option is great for people who don’t want to actively manage their own portfolio but still want access to diversified investments.
Cryptocurrency
And finally, there is the option of investing in cryptocurrencies. This digital asset class has become increasingly popular over the past few years, with Bitcoin and Ethereum being two of the most well-known examples. Cryptocurrency investments can be risky and volatile, so it’s important to do your research before investing any money.
EQ Bank RSP Savings Account
- 2.5% return rate
- No monthly fees or minimum balance requirements
- Unlimited free transfers between EQ Bank and other financial institutions
Motive Financial RRSP Savings Account
- High interest rate
- Zero monthly fee
- No minimum balance
CIBC RRSP Daily Interest Savings Account
- Competitive interest rates
- Ability to choose between daily and monthly contribution plans
- Low minimum opening balance of $1,000
Top 5 Best RRSP Account In Canada December 2022
Now that you already know about the different types of Canadian investment accounts, it’s time to talk about the best RRSP account in Canada.
EQ Bank RSP Savings Account
EQ Bank RSP Saving Account is a low-risk tolerance investment income and retirement savings account. It offers a competitive interest rate of 2.5% for deposits over $100,000 with no fees or minimum balance requirements. This account is ideal for those who are looking to build their long-term retirement portfolio without any risk or hassle.
- 2.5% return rate
- No monthly fees or minimum balance requirements
- Unlimited free transfers between EQ Bank and other financial institutions
- Limited withdrawal options
The EQ Bank RSP Savings Account is an excellent option for those looking to build their long-term retirement portfolio without any risk or hassle. With a competitive interest rate of 2.5% and no fees or minimum balance requirements, this account is ideal for those who want to access their money whenever they need it.
Withdrawal can be a hassle to some as you always need to contact EQ Bank first and wait for approval before you can access your funds. This is because your funds are subject to taxes and withholding. However, the unlimited free transfers between EQ Bank and other financial institutions make it easy to move funds to other investment portfolio whenever you need them.
Tangerine RSP Savings Account
Tangerine is second on our list of best RRSP accounts in Canada. This account is great for those looking to take advantage of a no-fee, high capital gains savings account. You can transfer money for free via Interact e-transfers or your cash account, it doesn’t have a monthly fee.
- Zero monthly fee
- Zero minimum balance
- Low fees
- Sub-par interest rates
Aside from its zero monthly fees and no minimum balance, Tangerine’s biggest selling point is its low fees. If you’re looking for an RRSP account with minimal fees, then this is definitely the one for you. Transaction fees are free and you can transfer money for free through Interact e-transfers.
Plus, they offer an automated savings program in which you can choose either to save a set amount each month either towards investment or emergency fund—or to have the website round up your purchases and transfer the difference into your savings.
The only downside is that the interest rate is not as high as some other accounts, but it’s still worth considering if fees are your main concern.
Motive Financial RRSP Savings Account
Next on our list is Motive Financial’s RRSP Savings Account. This online-only bank offers one of the highest interest rates in Canada at 1.50% on all deposits, regardless of the amount. It’s a subsidy of Canadian Western Bank, so you don’t have to worry about the safety of your money.
The minimum deposit amount is $500 and there are no monthly fees or service charges. This account offers a flexible amount of contributions and withdrawals whenever needed.
- High-interest rate
- Zero monthly fees
- No minimum balance
- Only allowed 2 free withdrawals per month
3.00%, yes you read it right, Motive Financial RRSP Savings Account offers you a 3.00% interest rate on all deposits $0 to $5,000,000. This is one of the best interest rates compared to other online-only banks in Canada.
Also, you can easily transfer money between Motive accounts — which means you can make your RRSP contributions from any of your other Motive Financial accounts. This is a great feature for people who want to invest their savings in different types of investments.
Alterna RRSP eSavings Account
No. 4 is Alterna’s RRSP eSavings Account. This is an online account that allows you to easily save for retirement in a tax-free environment.
- Ease-of-use
- Competitive interest rate
- Tax-free growth
- Small bank
Aside from the simplicity of its mobile app, with Alterna; you can earn compound interest on your RRSP savings with no fees and tax-free growth. Tax-free, in the sense, you won’t pay any capital gains tax that your savings generate. For example, other banks charge withholding tax on interest earned outside of an RRSP. But with Alterna, you don’t have to worry about that.
CIBC RRSP Daily Interest Savings Account
Last but not least, CIBC offers a great RRSP account in the form of their Daily Interest Savings Account. This is one of the most popular accounts out there because it’s an easy way to start your retirement savings while earning competitive interest rates on your money.
The great thing about this account is that you can choose between two different options – either a daily or monthly contribution plan. If you opt for the daily option, then you’ll receive a higher rate of return than if you choose the monthly option, but both will help to grow your nest egg quickly and easily.
- Competitive interest rates
- Ability to choose between daily and monthly contribution plans
- Low minimum opening balance of $1,000
- Higher account transfer fees
Basically, a CIBC RRSP Daily Interest Savings Account is the perfect choice for anyone who’s looking to start their retirement savings with an easy and convenient option. Its contribution plans make it accessible to anyone, and its competitive interest rate makes it a great option for growing your nest egg in the long term.
Especially its daily option, which offers a higher rate of return than the monthly option, is an attractive choice for anyone looking to maximize their savings.
Final Thought
The main advantage of using a Canadian Investment Account is that you can access tax-advantaged accounts to save for retirement and other financial goals. Additionally, these accounts typically have fewer restrictions when it comes to making investments or withdrawing your investment fund than non-registered accounts.
Finally, many types of Canadian Investment Accounts offer added incentives such as government grants programs or employer contributions. But understand that this is different from federal government bonds as these are investments with a fixed return.
The most popular type of Canadian Investment Account is the Registered Retirement Income Fund. This account allows you to save for retirement while also providing tax leverages. Contributions to the RRSP are made before income tax is calculated, and investments within the plan grow tax-free until withdrawal.
Other types of Canadian Investment Accounts include Tax-Free Savings Accounts (TFSAs), Registered Education Savings Plans (RESPs), Non-Registered Investment account, Group Retirement Savings Plans, Fixed Income Securities, and Locked In Retirement Accounts (LIRAs). Each of these accounts offers different benefits and capital gain depending on your needs and goals as an investor.
The amount of money you are allowed to contribute to a Canadian Investment Account varies depending on the type of account and your personal situation. Generally, there is an annual contribution limit for RRSPs and TFSAs, while RESPs have both annual and lifetime contribution limits. Non-registered investments do not have any contribution limits.
Most types of securities such as stocks, bonds, mutual funds, ETFs, GICs Fixed Income Investments and other investment products are eligible for Canadian Investment Accounts. Each type of account has its own unique set of rules and restrictions for initial investment, so it is important to research the specific requirements before investing.
Yes, different types of Canadian Investment Accounts have different tax implications. For example, RRSPs are taxed once you withdraw funds while TFSAs are not subject to taxes on investment gains or withdrawals. It’s important to understand the taxation rules associated with each type of account in order to maximize your returns and minimize your liabilities.
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