Canada Revenue Agency

Canada Revenue Agency

November 19, 2014 10:30 ET

Tax Tip: Planning for Your Financial Future

OTTAWA, ONTARIO--(Marketwired - Nov. 19, 2014) -

Did you know?

November is Financial Literacy Month. Financial literacy means having the knowledge, skills and confidence to make responsible financial decisions at any stage of your life. Everyone can benefit from improved financial literacy, a skill that is fundamental to the social, economic and physical well-being of Canadians. Gain the knowledge and confidence to make responsible financial decisions, from when you land your first job to after you retire. The Canada Revenue Agency (CRA) is proud to participate and to provide the following helpful planning tips.

Important facts

- 35% of Canadians do not have any savings or investments. (Source)

- Over 33% of Canadians find it difficult to keep up with their finances. (Source)

- The 2009 Economic Action Plan established the Task Force on Financial Literacy to better meet objectives for increased financial literacy amongst Canadians, appointing Jane Rooney as Canada's first Financial Literacy Leader in April 2014.

- In 2013, more than 90 public, private and non-profit organizations held close to 400 workshops and other educational activities to help Canadians improve their financial knowledge and skills during Financial Literacy Month.

- There are a number of free resources and events available for Canadians throughout the month of November to help increase financial awareness and literacy.

Financial Literacy Tips

Save money by opening a Tax Free Savings Account (TFSA) - the TFSA allows Canadians, age 18 and over, to set money aside, tax-free, throughout their lifetime. Each calendar year, you can contribute up to the TFSA dollar limit for the year, plus any unused TFSA contribution room from the previous year, and the amount you withdrew the year before. The annual TFSA dollar limit for 2014 is $5,500. Investing 5-10% of your paycheck into a TFSA can help increase your future savings faster.

Open and make regular contributions to a Registered Savings Plan (RSP) - an RSP allows you to save money long-term for:

  • Your retirement - Registered Retirement Savings Plan (RRSP)/ Pooled Registered Pension Plan (PRPP))
  • Your child's education - Registered Education Savings Plan (RESP); or
  • Disability - Registered Disability Savings Plan (RDSP).

Your contributions to your RRSP/PRPP can give you immediate tax benefits at a time when your income is generally highest and defers taxes to later years when your income is generally lower. The investment income earned in an RSP is not taxed until it is withdrawn allowing it to increase more quickly than it would outside of a RSP. The conditions vary for each savings plan, so learn which one is right for you.

Plan ahead - create a financial plan that includes a budget that keeps track of your income and expenses as well as specific financial goals you want to achieve. Tracking your day-to-day spending can help you identify where you are spending money without even realizing it, and where you can cut back expenses in favour of growing your savings. Include a payment schedule to track your long and short-term financial commitments to ensure that you are always meeting your obligations while maintaining your financial stability. Plan ahead. Be prepared for life's milestones and curveballs.

Teach children financial literacy with our Tax Resources for Educators - whether they're your students or your own children, you can start developing their financial literacy skills at a young age. Give your children the foundation they need to make responsible financial decisions throughout their lives by talking to them about money and saving. Have they recently started their first job or postsecondary education? Consider helping them learn about their tax obligations and possible benefits with our easy to teach or self-taught programs.

Educate yourself about your financial options - do you know the CRA's policy for tax corrections? Are you aware of the many types of benefits and credits you may be eligible for? How to create a comprehensive household budget? Taking the time to educate yourself about financial planning, assistance, and options is the best investment you can make for your financial future. Get educated with free financial literacy events this month. It pays to be well informed!

Be realistic - financial stability is measured on a long-term scale, not short-term, so ensure that your lifestyle is sustainable. Be well informed about what you can and can't afford and live within your means. A suggested emergency savings fund for a household should be able to cover between 3 to 6 months of living expenses in case of unforeseen circumstances. Being realistic, consistent and honest will help prepare you for a more secure financial future.

Take action to solve your money problems - don't be a victim of your financial situation. Know where you stand, the steps you need to take to get back on track and the options to help you achieve your goals. Not sure where to start? Don't be afraid to ask for help. The CRA offers assistance in helping individuals plan tax payment options that work for them. Even making one small change is better than none at all - small change adds up.

With more customized options for saving, spending, borrowing and investing than ever before, the CRA is proud to support the Government of Canada's initiative to help increase Canadians financial knowledge and take advantage of the many positive and long-term benefits of being financially literate. This month offers an opportunity for individuals and families across Canada to strengthen their financial literacy and management skills. There is no time like the present-investing in your financial future is one small investment that will pay off for the rest of your life.

Suggested Links:

- Financial Consumer Agency of Canada

- Financial Literacy Month Calendar of Events

- Tools for Success

- Building Personal Financial Security

Stay connected

To receive updates when new information is added to our website, you can:

- Follow the CRA on Twitter - @CanRevAgency.

- Subscribe to a CRA electronic mailing list.

- Add our RSS feeds to your feed reader.

- You can also watch our tax-related videos on YouTube.

Contact Information

  • Noel Carisse
    Media Relations
    Canada Revenue Agency
    613-952-9184