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Get Expert Advice on RRSP, TFSA and Student Loan Debt

Our Experts Answer Money Questions

Many people have questions about money. However, in our society, talking about money is often considered impolite or off-limits. This means that a lot of money questions are left unanswered. But the more information you have about money, debt, budgeting, and finances, the better choices you will make. This means you will have a greater likelihood of ending up in a better financial situation.

That’s why, every month, our experts answer questions about money and debt. If you have a question for our team, ask us online on Facebook, or through our website.

Please keep in mind that the questions here have been condensed or rewritten for clarity and simplicity.

Where’s a better place to put my money, a TFSA or an RRSP?

Much like many financial decisions, this truly depends on your particular situation. Since we don’t have all the details about your finances, we’re going to give some general guidelines.

It may be a better idea to put money in a TFSA if:

  • You have a company pension or other retirement plan and expect to earn a high income in retirement. Since taxes on an RRSP are deferred, you’ll have to pay tax on any money you withdraw from your RRSP when you’re retired. If you’re earning a high income in retirement, this could mean a higher tax bill later on.
  • You need the money short-term. If you’re planning on using the funds before you retire, a TFSA is generally a better option. This means if you want to save for a house, a car, or a vacation, a TFSA makes a lot more sense.

However, you might want to consider putting your money in an RRSP if:

  • You’re currently in a high-income tax bracket. An RRSP lets you defer taxes until you’re retired and presumably earning less money each year.
  • You don’t have a company pension. Investing in an RRSP is much more important if you don’t have a pension plan at work.
  • You want to “force” yourself to put money aside for retirement. Since you’ll pay tax when you take money from your RRSP, you’ll be much more likely to keep the money in the account until you need it in retirement.

Of course, the optimal situation is being able to contribute to both a TFSA and an RRSP. However, this isn’t always possible. After all, there’s only so much money to go around.

I’m having a lot of trouble paying off my student loans, how can I get help?

Many students leave school with a large amount of debt. This can make it tough to make ends meet, even after you have a full-time job. If you’re having trouble repaying your student loans, there are a few options available.

Some people consider debt consolidation to deal with student loan payments. This process can be helpful if your debt consolidation loan gives you a lower interest rate than what you’re currently paying on your student loan debt. However, depending on your debt situation, it might not be possible to get a debt consolidation loan with a lower interest rate.

Another option is bankruptcy or consumer proposal. However, in order to have student loan debt included in a bankruptcy or consumer proposal, the debt needs to be more than seven years old. This means that you must be out of school for at least seven years. If you haven’t been out of school for seven years, you can apply to have this period reduced to five years, in certain cases. For this application to be successful, you’ll have to show that you have made a reasonable effort to repay your student loan debt and you will need to prove that paying your student loans will cause you undue financial hardship. Even if this application is accepted, it will only reduce the period to five years from seven.

If you owe money to other creditors and these debts are making it difficult to repay your student loans, a consumer proposal or bankruptcy filing may still be beneficial to you. If this is your situation, you will want to speak with a Licensed Insolvency Trustee.

Another option that is available is the Canadian government’s student loan Repayment Assistance Plan. Under this plan, you could have your monthly payments reduced, depending on your family income. You must apply for this plan and must reapply every six months. Information on applying is available online.