How to save for a downpayment by growing your money faster
Buying a home is very exciting! Whether you’re ready now or planning for the future, here is one of the top things to keep in mind: Saving for a downpayment more efficiently.
A regular chequing account is meant for day-to-day use, and will not grow your money like these other accounts:
Registered Retirement Savings Plan (RRSP)
This program has been around for some time, but the government of Canada has made some improvements. You can now use up to $60K toward your downpayment for your first home, they’ve increased that cap to $60K. If used for your first home purchase, it is an interest free loan to yourself, which is more favourable than borrowing money from the bank. That money does have to be paid back to yourself, but over 15 years starting from the fifth year your withdrawal was made. And every contribution to your RRSP reduces your taxable income by the amount you contribute for that year. This means that you pay less taxes at the end of the year.
This is a multi-purpose savings account, whether it’s a car, a new business venture, a renovation, travel plans, or buying a home. When you invest funds within this savings account, any increases in value are tax free.
This is a new program introduced in 2023, which allows individuals to put up to $8K aside annually, while having the ability to reduce your taxable income by the amount you contribute for that year. This means that you pay less taxes at the end of the year. Just like a tax free savings account, you may invest this money within this account, any increases in value are tax free. The main difference is that contributions to the FHSA reduces your taxable income, whereas contributions to a TFSA does not.
Comparing the accounts
By understanding and utilizing these different savings options, you can strategically grow your money and make your dream of homeownership a reality. Whether you’re saving for your first home or planning for future investments, each account offers unique benefits that can help you reach your goals faster. If you have any questions about how to get started or need personalized advice, feel free to reach out. I'm here to help you navigate the path to homeownership with confidence!
Happy saving, and best of luck on your journey to buying a home!
