Chequing, Savings and TFSAs: Which Accounts Do You Need?

Start with two accounts

A chequing account is for everyday money. Your pay arrives here, and your debit card, bill payments and e-Transfers come out of it. A savings account is for money you don't need right away. Keeping them separate makes it easier to see what you can actually spend.

Build a safety net first

Before thinking about investing, most people aim to build an emergency fund, often three months of essential expenses. As a newcomer a safety net matters even more, because job searches and paperwork can take longer than expected.

1. Add up your essential monthly costs: rent, food, transit, phone and insurance.
2. Multiply by three for a first target.
3. Keep it in a savings account that's easy to reach but not linked to your everyday debit card.

Where a TFSA fits

A Tax-Free Savings Account (TFSA) lets money you save or invest grow without being taxed, and you can withdraw it at any time. Despite the name it can hold investments as well as cash. There's a yearly contribution limit, and your own room depends on when you became a resident and how old you are. Going over your limit can lead to a penalty, so check your room in your CRA My Account before contributing.

Where an RRSP fits

A Registered Retirement Savings Plan (RRSP) is designed for retirement. Contributions can reduce the tax you pay, but your room is based on Canadian income you've earned and filed taxes on. That means it usually becomes more useful after your first year or two of working here.

A simple order of priorities

1. A chequing account for daily life
2. An emergency fund in a savings account
3. Paying down any high-interest debt
4. A TFSA for medium-term goals
5. An RRSP once you have steady Canadian income