1. Revisit your budget
A budget is a great tool to help you stay on track with your spending and savings goals, but it needs to be updated regularly to maximize its effectiveness. Hopefully you’ve documented any changes to your income, expenses, or money goals throughout the year. If not, now is the time to do an in-depth update and analyze your progress.
If you notice signs of impulsive spending, it’s time to make some adjustments. For example, instead of depositing all of your income into an instant access checking or savings account, you could deposit some of your income into an account like EQ Bank’s high-interest free notice savings account. In exchange for early notice of withdrawal (10 or 30 days), you can get a higher interest rate. It’s a win-win for impulse shoppers who want to keep some distance.
Sponsored
EQ Bank Notice Savings Account
- Monthly fee: $0
- interest rate: The rate is 2.60% for 10 days’ notice and 2.75% for 30 days’ notice. Please read full details on the EQ Bank website.
- Minimum balance: not applicable
- To qualify for CDIC coverage: Yes
2. Simplify money management
If you think managing your own spending and savings is a challenge, try doing it with someone else! For some people (such as couples, family members, or even roommates), shared spending or shared savings goals can complicate budgeting. This is where a joint bank account can play a huge role.
When you open a joint account, all account holders (you and up to three other people) can deposit, withdraw, and save in the same account. Everything is in one place instead of trying to keep separate accounts. Make easier money management part of your financial decisions. Pro tip: Consider a no-monthly-fee, high-interest bank account like the EQ Bank Joint Account to keep your money growing.
3. Top up your retirement fund and get tax relief
A Registered Retirement Savings Plan (RRSP) allows you to save for retirement in a tax-advantaged account, which means every dollar you save reduces your taxable income the following year. Each year, you have a certain amount of RRSP contribution room, and any unused room can be carried over to subsequent years.
Your RRSP savings are taxed only after you withdraw them. The idea is that you’ll retire at that point, so your tax rate will be lower than it was while you were working.
Although the last day to contribute to an RRSP is March, many Canadians are striving to top up as early as possible. Not only does this give your savings more time to accumulate interest, it also ensures your retirement savings aren’t inadvertently used for vacation expenses.
4. If you need to, consider withdrawing money from your Tax-Free Savings Account (TFSA) before December 31
Similar to an RRSP, a Tax-Free Savings Account (TFSA) is a tax-advantaged registered savings account with a certain amount of contribution room added each year. The difference is that when you put money into a TFSA, you don’t get a tax deduction on your income taxes. Instead, any gains you make are yours, tax-free.
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The annual deadline for TFSA deposits is December 31, and you will receive new contribution room on January 1. What you may not know is that when you withdraw funds from a TFSA, the amount you withdraw will be added back to your contribution room the following calendar year.
So if you expect to need the money soon but still want to use your full contribution room next year, taking a withdrawal before December 31st is a good time because you’ll get that room back quickly.
Sponsored
EQ Bank TFSA Savings Account
- interest rate: Earn 1.50% on cash savings. Please read full details on the EQ Bank website.
- Minimum balance: not applicable
- cost: not applicable
- To qualify for CDIC coverage: Yes, for deposit
5. Use savings to buy a house
A First Home Savings Account (FHSA) is a tax-advantaged investment that works like an RRSP in that the funds you deposit reduce the amount of your taxable income. And, like a TFSA, the funds you withdraw are tax-free. Unused contribution room from each year is carried over to the next year, so if you never contributed but now open contribution room, you can save up to $16,000 per person (or twice as much as a couple) by 2026.
Unlike a TFSA or RRSP, you don’t start accumulating contribution room until you open an FHSA. So, if you don’t have an FHSA but plan to open one, doing so before December 31 can give you an extra year of contribution room in 2025.
On the other hand, if you have some extra cash (perhaps a year-end bonus!) to put into savings, depositing funds into your existing account before the December 31st deadline can reduce your taxable income in 2025.
Start making financial plans for the new year
The end of the year is a good time to take stock of your financial health. By choosing the right banking products and making smart investment decisions, you can set yourself up for lasting security and success.
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