I’m getting 5 thousand dollars pretty soon and I’ve found it hard to save in these past months, since I don’t really need the extra money and haven’t started investing in my retirement I thought I’d try and figure out what’s the best thing to do with this money to help me in the future, I make 30k a year at 20 years old and just want some advice on what direction I should be heading in
Where to store 5k for retirement?
- Thread starter michaelaj
- Start date
@michaelaj Open up a self directed FHSA account, it's similar to an RRSP but that might more beneficial for you incase you'd want to put it into a home years down the line. You'll save income tax as well depending on your contribution.
@michaelaj You can do ut online as well, either with your bank or questrade where I have mine. Just make sure you don't go over your yearly contribution room.
@michaelaj An RRSP might be a good option. You get a tax credit as a result and would likely net you a fair refund on that amount when you do your taxes for the tax year.
Smart people would then tax that tax refund and re-invest it (and more if possible) in subsequent years. Now is the time for you to be taking advantage of the "miracle of compound interest".
Smart people would then tax that tax refund and re-invest it (and more if possible) in subsequent years. Now is the time for you to be taking advantage of the "miracle of compound interest".
@michaelaj Look at the Saskatchewan Pension Plan, open to all Canadians and uses RRSP room to build you a private pension for retirement.
jenrummy84
New member
@michaelaj I’d strongly suggest a TFSA and invest in index funds. The big benefit to a TFSA over an RRSP is liquidity (let’s say at 30 you need $10k, you can pull this from your TFSA without penalty but your RRSP will see penalties and taxes). You also pay taxes on every dollar of your RRSP - it’s just deferred until you’re older. You do not pay taxes on interest from TFSA.
I started throwing $100 a pay check into my RRSP around 20 and 12 years later I am in way better financial shape then the huge majority of my friends. My only regret is using an RRSP and not a TFSA.
I started throwing $100 a pay check into my RRSP around 20 and 12 years later I am in way better financial shape then the huge majority of my friends. My only regret is using an RRSP and not a TFSA.
@jenrummy84 Great advice, I was really wondering what the biggest differences between tfsa and rrsp are, I will do some research and see what’s the best avenue for me. Thanks 
jenrummy84
New member
@michaelaj Either option you pick is going to be a great use of money, so don’t stress too much over which vehicle you pick. There are pro’s and con’s to both and people will argue until they’re blue in the face over benefits - but ultimately both are way better then spending it at the bar.
I’d also strongly encourage you to setup a $100 a pay check automatic deposit to whichever vehicle you choose. This will feel like a big hit but trust me - your spending habits will adjust. And your future self will be eternally grateful that you made the investment. Compound interest is the best vehicle for young people to build wealth in Canada as home ownership becomes out of reach. Our parents built wealth in their homes. We need to look at it differently and you’re positioning yourself to be the wealthy amongst your peers by doing so.
I’d also strongly encourage you to setup a $100 a pay check automatic deposit to whichever vehicle you choose. This will feel like a big hit but trust me - your spending habits will adjust. And your future self will be eternally grateful that you made the investment. Compound interest is the best vehicle for young people to build wealth in Canada as home ownership becomes out of reach. Our parents built wealth in their homes. We need to look at it differently and you’re positioning yourself to be the wealthy amongst your peers by doing so.
@jenrummy84 Agreed, I already feel like I’m late to investing even though I’m only 20, but I’ve been working for a few years now and nothing saved up to show for it. Thanks for the advice, will definitely be putting it to use 
jenrummy84
New member
@michaelaj Buddy at 20 you’re miles ahead trust me lol. Good luck and good fortune in whatever you choose and congrats on taking this first step to financial stability.
desringgod7
New member
@michaelaj Put it in a Roth IRA. At 20, you've got time on your side. Compound interest will work wonders. Choose a low-cost index fund. Vanguard, Fidelity, and Schwab are good places to start. Keep contributing regularly.
For retirement info, I stumbled upon retirehub.org. Found some solid deals and retirement tips there. Might be worth a look for guidance as you start this journey.
Remember, the earlier you start, the better off you'll be. Stay consistent and increase contributions when you can. Good luck.
For retirement info, I stumbled upon retirehub.org. Found some solid deals and retirement tips there. Might be worth a look for guidance as you start this journey.
Remember, the earlier you start, the better off you'll be. Stay consistent and increase contributions when you can. Good luck.
@desringgod7 Would it be a good idea to split it and put half into a Roth ira and half into a tfsa but deposit $200 into both of them monthly? I appreciate your advice 