Reasons to open another investment account

As we learn more about finances and expand our goals, it’s common to experience a “what next?” moment. Maybe it’s because you feel that one account isn’t enough to cover all your financial needs, or maybe you think that there are different account types that are better suited to your goals. Either way, you’re not alone.

The benefits of opening an additional account will depend on your unique financial situation. Sometimes there is a single “right account”, but there are a wide range of reasons why you might want to open another account, such as:

You’re planning on buying your first home

The First Home Savings Account (FHSA) is designed specifically to help Canadians afford their first home by providing a number of tax advantages. Contributions to an FHSA can be claimed on your taxes similar to RRSP contributions, and qualifying withdrawals are completely tax-free similar to TFSAs.

With an FHSA, you can accumulate up to $8,000 in contribution room every year, up to a maximum of $40,000 lifetime contribution. You also have 15 years, or until you’re 71 years old, to make a qualifying withdrawal. If you don’t, then your FHSA can be folded into an RRSP without any negative effect on your taxes or RRSP contribution room.

Your family circumstances are changing

Changing family circumstances can often make you re-examine your finances and how you set up your savings, and with good reason. The Government of Canada has a number of registered investment accounts that can help you achieve your financial goals with your family.

For example, if you have a child, opening a Registered Education Savings Plan (RESP) to save for their future education can give you access to government grants and tax-free investment growth. If you’re married and one spouse earns more than the other, a Spousal RRSP can help you both save for retirement.

You’re planning for (or changing) your goals

Some people choose to open new accounts to invest towards a particular goal. This might make it easier to visualize progress towards your goal, or to split your savings amongst multiple simultaneous goals, such as saving for both retirement and a vacation.

In addition, while you can use any account to save for a goal, some accounts are designed to make it easier to save for a specific goal. For example, you can save for retirement with an RRSP, but you can also access those funds to pay for education via the Lifelong Learning Plan, or for purchasing your first home with the Home Buyer’s Plan.

You’re working to optimize your taxes

Different registered accounts have different potential tax advantages. For example, you can deduct RRSP contributions from your taxes, but withdrawals are considered taxable income.

Meanwhile, TFSA contributions aren’t tax-deductible, but withdrawals are not considered taxable income. These accounts are designed to make it easier for Canadians to achieve their financial goals by providing specific tax benefits.

FHSA contributions have benefits of both an RRSP and TFSA: you can deduct your contributions, and qualifying withdrawals are not considered taxable income.

Whether you’re planning on using a specific account to optimize your taxes today or planning for the future, we always recommend consulting with a tax professional.

You want to change your investment plan

While registered accounts such as TFSAs, FHSAs, and RRSPs might have some advantages, they also have limitations when it comes to investing choices.

For example, registered accounts are limited to investing only on designated exchanges, and cannot access certain types of option trades, short-selling stocks, or investing on margin.

Opening a new type of account can give you access to these advanced investment tools, but we always recommend doing thorough research before you get started.

You’ve maxed out your contribution room

This might be the best reason to open a new account, and it’s certainly a good problem to have.

Registered accounts such as TFSAs, RRSPs, FHSAs, and RESPs come with contribution limits that can lead to financial penalties if you exceed them. If you’ve maxed out your contribution room in one account but want to continue saving, you might want to open a different registered account type. If that’s not an option, non-registered accounts, such as Margin and Cash accounts, don’t have contribution limits.

Whatever your reason for opening a new account, Questrade makes it easy. You can learn more about how to open an additional account here.