FAQs

If you're earning under $60,000, prioritize your TFSA first. The flexibility is incredible - you can withdraw anytime without penalties, and all growth is tax-free forever. Generally speaking, if you're earning over $114,000 based on 2025 tax brackets, consider your RRSP first for that tax reduction. For business owners with variable income, the TFSA is often the better choice because it's very flexible and tax-free growth is difficult to find elsewhere.

Every Canadian’s situation is different, but here's a framework. By age 30, aim for 3-6 months of business and personal expenses saved, plus started your TFSA and RRSP. By 40, three times your annual income invested in tax-advantaged registered accounts. By 50, five times your annual income in a mix of investments, real estate and insurance if required. For incorporated professionals, factor in both personal salary and corporate retained earnings. Don't panic if you're behind - your personal situation matters more than arbitrary benchmarks.

Keep 3-6 months of essential business and personal expenses in a savings account or TFSA. Don’t just leave it in cash either. Business owners with steady revenue might need 3 months, while those with variable income should lean toward 6-12 months. This money should be boring and liquid - don't invest your emergency fund in stocks. Consider a high-interest cash ETF or mutual fund with no fees to earn higher interest than traditional bank savings deposits.

If your mortgage rate is under the expected rate of return of a diversified portfolio, and you're disciplined about actually investing, investing typically wins long-term. But not everyone is that disciplined. Paying off your mortgage is a guaranteed return equal to your mortgage rate. For business owners, consider cash flow flexibility - mortgage payments are predictable, while business income may fluctuate. If mortgage stress keeps you awake, pay it off. Peace of mind might be worth more than extra returns.

The 2025 limit is $7,000, but your total room depends on when you became eligible. Eligible since 2009? $102,000 total room. Since 2015? $71,000. Since 2020? $38,500. Check CRA MyAccount for your exact room. Pro tip - if you withdraw money, you must wait until January 1st to re-contribute that amount or you'll face 1% monthly penalties.

Yes, but there's one crucial rule. You can withdraw anytime for any reason without taxes or penalties. But if you withdraw and immediately put it back in the same calendar year, you've over-contributed and face 1% monthly penalties. You must wait until January 1st of the following year to re-contribute that amount. This flexibility makes TFSAs excellent for business owners who might need emergency access to funds.

The evidence shows that a focus on low-cost, total market ETFs helps you get used to the market and builds your wealth responsibly. Consider all-in-one funds if you are unsure, but always do your research. Don’t gamble with your money – remember, it’s not a Tax-Free Gambling Account. If you’re an incorporated professional, spend more time focusing on tax minimization, comprehensive financial planning, retirement readiness and budgeting rather than stock picking.

Active investing attempts to beat the market through professional strategies and research insights. Passive investing means buying the whole market to avoid actively trying to beat the benchmark. SPIVA data shows 100% of fund managers fail to beat the S&P 500 on a risk-adjusted basis over 10-years ending 2024. Active funds also charge higher fees, which often accounts for most of the underperformance. For most people, passive equity investing is smarter, cheaper and easier.

If you can pay all your corporate and personal expenses, contribute to your RRSP and TFSA, and still have leftover cash in your corporation, incorporation usually makes sense. You'll pay about 11-12% corporate tax for retained funds, versus personal rates up to 53%. That's massive tax deferral on money you don't need personally today. But incorporation adds complexity and cost, so get proper professional advice for your specific situation.

Pay yourself enough salary to generate RRSP room and CPP contributions. Take anything else you need as dividends for tax efficiency. This depends on your personal tax situation, family income, withdrawal patterns, and retirement income goals. Work with your accountant and financial planner to design optimal compensation for each year, as tax rules, rates and your circumstances change regularly.

University costs about $80,000-120,000 for four years in Canada and rising. Most families invest $2,500 annually for each child in their RESP to get the full $500 government grant. Invested properly, this may accumulate to $50,000-75,000 by age 18. Advanced strategies like front-loading contributions can potentially grow an RESP to over $150,000 by age 18, but these strategies depend on your specific situation and cash flow capacity. Consult with your advisor first.

There's no annual limit, but $50,000 lifetime maximum per child. To maximize government money, contribute $2,500 annually for the full $500 Canada Education Savings Grant - a guaranteed 20% return. Some provinces offer additional grants. Remember: you can only 'catch up' one additional year at a time, so $5,000 per year maximizes the available grants.

Retirement first, generally. You can't get a scholarship for retirement, but your child may qualify for education funding. Think of it like an oxygen mask on an airplane - secure your financial future first so you can help your children long-term. For business owners, consider using RRSP refunds to fund RESPs if you don't need the additional cash flow. As always, this should be discussed with your planner first – they’ll adjust the plan to suit your personal tax situation, cash flow and education savings goals.

Think of insurance as a tax-efficient income replacement. Term life insurance covering 5-10 times your annual income ensures your family receives years of salary tax-free if something happens. For business owners, consider additional coverage for business debts and buy-sell agreements. Don't overlook disability insurance covering 60-70% of income - this includes serious illness, chronic conditions, and mental health issues, not just workplace accidents.

Search the planner directory on FPCanada.ca. Look for CFP or QAFP designations - evidence they've invested in their financial education and are in good standing with regulators. CIM designation indicates they're likely a Portfolio Manager with fiduciary responsibility and all are held to higher ethical standards. Check registration with provincial securities commissions. Interview multiple advisors and assess their firm's reputation. A good advisor clearly explains their philosophy, background, fees and long-term approach up front.

Fees vary widely. Commission-based advisors charge through product sales. Fee-for-service providers can be in the thousands of dollars, but don’t have ongoing fees. Assets Under Management fee schedules are most common in Canada, with advisors charging based on your size of assets (a lower % for more AUM). For business owners with complex situations, comprehensive and holistic financial planning may justify higher fees. The key is understanding exactly how your advisor gets paid and ensuring the value justifies the cost.

Consider professional help when you incorporate, have complex tax situations, significant personal and business assets, multiple competing goals, a family, or major business transitions. Also if you lack time for self-directed planning, which is common for successful professionals. You don't need to be ultra-wealthy, but you need enough complexity to justify the cost. Look for advisors who help with your complete financial picture: tax, estate, insurance, and business succession planning.

Robo-advisors work well for simple investment needs with low fees as high as 0.5%. Human advisors are often used for complex business situations, tax planning strategies, estate planning, or significant assets, as well as behavioural and emotional coaching. Business owners often start with DIY approaches, and soon move to human advisors as their complexity increases. Human advisors become even more valuable for that personal touch and comprehensive planning in an increasingly automated world.

Rebalance annually or when any investment drifts more than 5-10% from target. E.g., If you want 80% stocks, rebalance when equities hit 85-90% or drop below 70-75%. Don't rebalance monthly – that's overtrading. Set an annual January reminder. For business owners with non-registered accounts, remember that rebalancing triggers capital gains, so coordinate with your overall tax strategy.

To save on tax you should contribute savings to your TFSA, FHSA and RRSP. In taxable accounts, hold tax-efficient investments like Canadian dividend stocks for the dividend tax credit. Consider tax-loss harvesting at year-end: sell losing investments to generate capital losses that offset any income, dividend or capital gains. You can buy back after 30 days to avoid superficial loss rules. For business owners, coordinate this with corporate and personal tax planning to ensure your tax situation is predictable and efficient.

Beyond basic wills and powers of attorney, business owners often need buy-sell agreements, business valuation strategies, and tax-efficient wealth transfer plans. Consider how your business interest passes to family or partners. Life insurance can fund buy-sell agreements or provide liquidity for taxes. Work with estate planning professionals who understand business structures and tax implications of business succession.

Start early - succession planning must be finalized at least 24 months in advance. Often, we recommend starting 3-5 or even 10 years in advance. Options include family transfers, management buyouts, employee ownership plans, or third-party sales. Each has different tax implications and timing requirements. Consider gradual transfers to minimize tax hits, use of trusts, and insurance to fund transitions. Work with professionals who specialize in business succession to coordinate legal, tax, and financial strategies.

Beyond maximizing RRSP and TFSA contributions, consider income splitting with family members, pension income splitting in retirement, and strategic use of capital gains vs. dividend income. If incorporated, optimize salary vs. dividend mix annually. Consider timing of income recognition and expense deductions. Invest corporate surplus cash to generate additional returns (subject to certain limits like passive income rules). For professionals approaching retirement, coordinate income withdrawal strategies ASAP to minimize lifetime tax burden.

Professional liability insurance is essential, plus general business insurance if you have physical premises. Consider key person insurance on yourself and critical employees. Disability insurance should cover both personal income and business expenses. If you have business partners, buy-sell agreements funded by life insurance prevent messy transitions. Health and dental coverage can be tax-deductible corporate expenses.

Start when your financial situation becomes too complex to manage alone - typically when you incorporate, buy a home, start a family, or accumulate significant assets. Don't wait until you're wealthy. Early planning prevents costly mistakes and maximizes long-term wealth building. For professionals, the complexity of tax optimization, business structures, and estate planning often justifies professional help earlier than traditional employees might need.