Investment account types in Canada
Learn about different account types to help you reach your financial goals faster.
CIBC Investor's Edge
4-minute read
As a newcomer, you’ll want to learn about the types of investment accounts that can help you reach your financial goals faster.
Before we explain account types, you should know that at Investor’s Edge you can hold many different types of investments in each type of account we offer. For example, in each account type, you can hold a wide variety of investments like stocks, mutual funds, GICs, and much more.
As an investor with Investor’s Edge, you’ll open one or more accounts and within those accounts you’ll place your investments. You can buy or sell the investments within the account, and we make that easy at Investor’s Edge.
In Canada, there are two general types of account where you can hold investments:
- Registered accounts, also known as tax-advantaged accounts, are registered with the government and allow you to invest and grow your money while also saving on taxes.
- Non-registered accounts don’t offer tax advantages but have other benefits.
Read on to understand the differences between these account types.
Registered accounts may provide from tax savings
Tax-Free Savings Account (TFSA)
Who is this for?
A TFSA can help grow your savings for short- or long-term financial goals. You can save for a vacation, a car, home purchase, add to retirement savings, supplement your income or anything else you decide.
What are the benefits?
- The investments in a TFSA grow tax-free, so you won’t pay tax on the capital gains, dividends and interest you accumulate.
- There’s also no tax on withdrawals and withdrawals create new contribution room.
How does it work?
Contribution room: There’s a limit on the amount you can contribute without penalty. If you don’t use all your contribution room during a given year, that amount is carried forward and increases your contribution room in the following year.
Age: New immigrants that are 18 (or 19 in certain provinces and territories) and older can immediately open a TFSA in the year they arrive in Canada.
Taxes: You won’t get a tax deduction for your contribution, but there’s no tax on income or growth in the plan, and funds and can be withdrawn tax-free.
Find out more about the TFSA.1
Registered Retirement Savings Plan (RRSP)
Who is this for?
The RRSP is mainly used to save for retirement.
What are the benefits?
- You may be able to claim a tax deduction for contributions you make to an RRSP. This may reduce the amount of tax that is payable.
- In an RRSP, there’s no tax on income or growth earned on investments in the plan.
- An added benefit is you may be able to borrow from an RRSP to help buy a home or pay for post-secondary education.
How does it work?
You may be able to claim a tax deduction for contributions, up to your RRSP contribution room that is calculated as 18% of earned income in the previous year with a maximum of $31,560 for 2024 ($32,490 for 2025), subject to any pension adjustments, plus any unused contribution room from prior years.
When you eventually withdraw money from the RRSP, usually during retirement, the money is taxed as income.
Find out more about the RRSP.
First Home Savings Account (FHSA)
Who is this for?
The FHSA may make it easier to save for your first home purchase.
What are the benefits?
Qualified first-time homebuyers can claim a tax deduction for contributions to the plan, up to $8,000 per year and $40,000 in total. There is no tax on income or growth in the plan, and funds and withdrawals are tax-free when used to buy a qualifying first home.
How does it work?
There are some qualifications to be eligible to open an FHSA. There are also rules around when and how the money can be withdrawn, how it can be used and contribution limits. Click the link below to learn more.
Find out more about the FHSA.
Registered Education Savings Plan (RESP)
Who is this for?
The RESP helps you save for your child’s post-secondary education.
What are the benefits?
Up to $50,000 may be contributed during the lifetime of the student. Grants and bonds may be available from the government of Canada and there is no tax on income or growth in the plan.
How does it work?
When the income, growth, grants and bonds are withdrawn to pay for a student’s post-secondary education, it’s taxed in the student's hands. Students often have little or no income, so they may not owe tax on these withdrawals. Withdrawals of the RESP contributions are not taxable, though grants and bonds may need to be repaid if the student doesn’t attend post-secondary school.
Find out more about the RESP.
Non-registered investment accounts
Who is this for?
These accounts offer a lot of flexibility for investors and traders. There are no limits on the amounts or timing of your deposits and withdrawals.
What are the benefits?
- While income is taxable in these plans and there’s no tax deduction for your contributions, there are no limits to the amount of money you can deposit to them.
- Certain types of transactions such as short selling and some sophisticated option strategies are only available in margin accounts, a type of non-registered investment account.
How does it work?
Non-registered investment accounts can be cash accounts or margin accounts. With a cash account, you’ll pay for each investment purchase in full, while in a margin account you can borrow to make your purchases, up to certain limits. You’re not obliged to borrow in a margin account, but that option is available, and you’ll pay interest on any amounts you borrow.
Find out more about margin accounts.
