Whether you’ve cleared a credit card balance, finished paying off a consolidation loan, or are finally seeing progress, paying off debt is a major win. The moment that last payment is made brings with it an important question: What do I do now? Save money? Get that thing I’ve been looking buy?
The obvious answer is to put your extra money into savings, but there are many options, and each works a little differently, so knowing where to save can be confusing. Some savings vehicles are simple and flexible, while others provide tax advantages, but have rules you need to follow.
In this guide, I’ll cover the most common accounts Canadians use to save money. While you can’t expect to become a savvy investor overnight, understanding your options will help you make smart choices.
High-Interest Savings Account
What it is
A high-interest savings account, often called a HISA, is a regular savings account that offers a higher interest rate. It’s usually offered as a non-registered account, which means it does not come with special tax benefits.
How it works
Savings accounts are very simple. You deposit money and earn interest on your balance. The main advantages of savings accounts are safety and liquidity. That is, the funds in your account are guaranteed by the issuer, and you can add or withdraw money at any time.
The main difference between a high-interest savings account and a standard savings account is the interest rate. Many big bank savings accounts pay very little interest and may limit how often you can make free transactions. The HISAs offered by online banks usually pay higher rates and don’t restrict monthly transactions.
Pros and cons
Pros
- Low-risk, your funds are guaranteed by the issuer
- Access your money at any time
- No contribution limits or special rules to worry about
Cons
- Variable interest rates will fluctuate
- Returns may not keep up with inflation
- Interest earned is taxable (in non-registered accounts)
Who it’s best for
Savings accounts are ideal for emergency savings, short-term goals (e.g., vacation, holiday shopping), or for anyone who wants to keep things simple and low-risk.
Guaranteed Investment Certificates
What it is
A Guaranteed Investment Certificate, or GIC, is a low-risk investment that pays a fixed rate of interest over a set period of time. When you buy a GIC, you are lending your money to a bank or financial institution, and they agree to pay it back to you with interest at the end of a set term.
How it works
You choose how much money to invest and how long you want to lock it in, such as six months, one year, or five years. During that period, your funds typically cannot be accessed without a penalty. In return, you earn a guaranteed rate of interest that does not change. GICs can be held on their own in non-registered accounts or in registered accounts such as a TFSA, RRSP, or FHSA.
Pros and cons
Pros
- Guaranteed rate of return
- Safe investment, as deposits are guaranteed by the issuer and protected with deposit insurance
- Easy to understand
Cons
- Money is usually locked in for the full term
- Lower long-term growth compared to market-based investments
- Interest is taxable if held outside a registered account
Who it’s best for
GICs are a good choice for people who want predictable returns without much investment risk. They work well for short- to medium-term goals, or for money you know you will not need right away. Like savings accounts, GICs are easy to understand.
Tax-Free Savings Account
What it is
A Tax-Free Savings Account (TFSA) is a registered account that allows your money to grow tax-free. Despite the name, it is not just a savings account. I like to think of it as a tax-sheltered umbrella, inside which you can hold different types of investments.
How it works
With a TFSA, you contribute money using dollars you have already paid tax on. Inside, you can hold cash, high-interest savings, guaranteed investment certificates (GICs), mutual funds, exchange-traded funds (ETFs), or even individual stocks. Any growth inside the account is not taxed, and withdrawals are tax-free. If you withdraw funds, the contribution room is restored the following year.
Pros and cons
Pros
- Your money grows tax-free, and withdrawals are not taxed
- The flexibility makes it ideal for short, medium, or long-term goals
- You can hold many types of investments in your account
Cons
- Annual contribution limits apply ($7,000 for 2026)
- Overcontributing can lead to penalties
- Depending on how you choose to invest, you could lose money
Who it’s best for
The TFSA works well for many savings goals, including emergency funds, medium-term goals, or long-term investing. Its flexibility makes it a strong first registered account if you are rebuilding your finances.
Registered Retirement Savings Plan
What it is
A Registered Retirement Savings Plan (RRSP) is a registered account designed to help Canadians save for retirement. Like a TFSA, it is an umbrella account that can hold many types of investments.
How it works
Unlike a TFSA, the money you put into an RRSP is usually tax-deductible. This means you may pay less income tax in the year you contribute. Inside the account, your investments grow tax-deferred. However, you will pay tax later when you withdraw the money, usually in retirement, when your income may be lower.
Pros and cons
Pros
- Contributions may reduce your taxable income
- Investments grow tax-deferred until you withdraw them
- For many, it’s the best account for long-term retirement savings
Cons
- Withdrawals are taxed as income
- Early withdrawals can trigger penalties and lost contribution room
- Not well-suited for most short-term savings needs
Who it’s best for
RRSPs are often best for people with stable incomes who can prioritize long-term retirement savings while maintaining short-term access to cash.
First Home Savings Account
What it is
Introduced by the Canadian government in 2023, the First Home Savings Account (FHSA) is a registered account designed to help first-time home buyers save for a down payment. It combines features of both a TFSA and an RRSP.
How it works
Like an RRSP, contributions may be tax-deductible. The funds in the account are tax-sheltered, and qualifying withdrawals are not taxable, like a TFSA. You can hold a wide range of investments in an FHSA, including savings, GICs, and market-based options, like mutual funds, ETFs, and individual stocks.
Pros and cons
Pros
- Contributions may be tax-deductible
- Qualifying withdrawals for a first home are tax-free
- Can help you save for a down payment
Cons
- Only available to first-time home buyers
- Contribution and lifetime limits apply
- Only suitable for housing-related use
Who it’s best for
FHSA accounts are best for Canadians planning to buy their first home and want a tax-advantaged option to save for that goal.
Registered Education Savings Plan
What it is
A Registered Education Savings Plan (RESP) is a registered account parents can use to save for their child’s post-secondary education. Like the TFSA and RRSP, it’s another example of an umbrella account, under which you can invest your money in many different ways.
How it works
Parents, grandparents, or others can contribute money to an RESP. Eligible contributions are usually eligible for government grants, which can boost your investment value over time. Investments inside the account grow tax-deferred, and eligible withdrawals can be taxed in the student’s hands, often at a low rate.
Pros and cons
Pros
- Eligible for government grants that boost savings
- Investment growth is tax-deferred
- Eligible withdrawals can be taxed at the student’s lower income level
Cons
- Limited flexibility, as the money is meant for education
- Grant money may need to be returned if plans change
- There are annual and lifetime contribution limits
Who it’s best for
RESPs are ideal for families who want to save for future education costs and take advantage of government support.
Tips to help you save more
Pay yourself first
One of the easiest ways to save more is to treat your savings like a bill you have to pay. As soon as you get paid, move a set amount into your savings account before spending on anything else. This works because you save before you have a chance to spend the money.
Automate your savings
When you automate something, it’s more likely to happen. Most financial institutions allow you to set up automatic transfers, so you don’t have to rely on your own willpower. You can arrange to have funds transferred from your chequing account to your savings or registered account on a monthly or biweekly schedule, to coincide with your paydays.
Start small
Does the thought of saving money seem stressful? If so, I recommend starting with an amount that feels easy, even if it is only $25 or $50 per month. Once you get used to that level, you can slowly increase it over time. This approach works because it builds confidence and prevents you from feeling deprived. Saving should feel achievable, not difficult.
Avoid lifestyle creep
Lifestyle creep, or lifestyle inflation, is when your spending slowly increases as your income goes up, leaving little or no extra money to save, even though you earn more.
After paying off debt, people are often tempted to spend more because they finally have room in their budget. While it’s okay to enjoy some freedom, try to avoid increasing your spending too quickly. Avoiding lifestyle creep means you can redirect your extra cash toward savings instead.
