Your favorite high-interest bank is now offering registered accounts! EQ Bank launched Tax-Free Savings Accounts (TFSAs) and Registered Retirement Savings Plans (RRSPs) just last week. You can now earn their super high everyday interest rate on tax-sheltered investments.
Who is EQ Bank?
EQ Bank is a digital bank offering no-fee, high-interest banking to Canadians. Their Savings Plus Account offers a blend of saving and banking features including unlimited Interac eTransfers, unlimited bill pay, no day-to-day banking fees, and a very competitive interest rate. EQ Bank consistently stands out against competitors as one of the best banking options in Canada.
You can read more in our full EQ Bank Review here.
What is a registered account?
A registered account is a financial account that’s a designated tax-shelter in some way. There a number of different registered accounts such as the RESP, LIRA, RDSP, and of course the TFSA and RRSP.
Registered account protect your investment income by reducing, or even eliminating, the income taxes you pay on interest, dividends, and capital gains. Tax-sheltering your investment income is an important component of growing your wealth and achieving financial security.
At this time, EQ Bank is only offering the TFSA and RRSP, but may add more registered accounts in the future.
The TFSA (Tax-Free Savings Account)
The Tax-Free Savings Account (TFSA) is the best tax-shelter available for Canadians because all investment income earned within this account is completely tax-free. This makes the TFSA the best retirement account available, as long as you stay within your contribution limits.
Here are some great articles about the TFSA:
The RRSP (Registered Retirement Savings Plan)
The Registered Retirement Savings Plan (RRSP) isn’t quite as powerful as the TFSA, but most Canadians end up with a lot more contribution room in this account which makes up for it. All investment income earned in your RRSP is tax-deferred, so you don’t pay any income tax until you’re retired and your income is lower.
Here are some great articles about the RRSP:
- How to Withdraw from Your RRSP Without Paying Tax
- How Much Should You Have Saved For Retirement by Age 30
- When Maxing Out RRSP Contributions is the Wrong Choice
Why should I choose a TFSA or RRSP for my savings?
If a tax shelter is available for your investment income, you absolutely should take it. There’s no reason not to! The tax-optimizing power of the TFSA and RRSP help your money grow faster in these accounts, which means you’ll reach your financial goals sooner.
For the most part, you should be using your TFSA and RRSP to invest in the stock market, but there are a few reasons why you may choose to hold cash in a savings account instead. Some reasons you might choose to keep a TFSA or RRSP savings account instead of an investment account include:
- You are saving up the $1,000 or $5,000 minimum sometimes needed to open an investment account
- You are choosing to maintain the cash allocation of your retirement portfolio where it will earn interest (instead of earning no interest sitting in your brokerage account)
- You are planning to use the cash as a downpayment on your first home (don’t forget about the RRSP First Time Home buyer’s Plan!)
- You are simply not comfortable with the risk of investing in the stock market and prefer a savings account
Clients have been demanding TFSAs and RRSPs from EQ Bank for a LONG time so it’s great that they’re finally here!
