Start the year right as many of us wrote on our goals and new year’s resolution for 2020. Whether it is about getting in shape by going to the gym or eating healthily by getting rid of carbs and junk foods.

Same weight should we put on how to make our money work harder for us by taking advantage of governments registered accounts. Making contributions to these investments and making it a priority is well worth it for any Canadian investors.

Tax Free Savings Account (TFSA)

1) Max out $6000 TFSA annual contribution. This is best achieved by putting at the beginning of the year.

If you have not contributed yourself to your TFSA and you were 18 or 19 (depending on which province age of majority you live in Canada) and a Canadian citizen or permanent resident in 2009, you are allowed to contribute a maximum of $69,500 this year 2020.

By doing so, your investments will grow tax free. You can decide yourself in a variety of investment vehicles such as opening a High Savings Account (HISA), GIC, mutual funds, ETFs or stocks. Withdrawal is allowed anytime and will not be taxed.

Note: Just be very careful that any withdrawal amounts for that year can’t be contributed back for the same year if you have already maxed out your contributions.  If you make a mistake and re-contribute same amount that year (considered over-contribution) you will be charged a tax equal to 1% the highest TFSA excess amount and for each month the excess remains in your account.

For many dividend income investors, the best strategy is to max out contributions at the beginning of the year. This means you have increased income by the end of the year as dividend income investors reinvest their dividends every time they get paid.  This in comparison if you staggered your contribution throughout the year. Of course, if you can’t come up with the $6,000 contribution at the beginning of the year just put whatever you can, whether every payday or whenever you have extra cash.

Registered Education Savings Plan (RESP)

2) Families who have younger children, one of an excellent way to save for your child’s higher education is to open a Registered Education Savings Plan (RESP). The program of the government called Canada Education Savings Grant (CESG) will match a portion of your contribution up to a full 20% of $2500. You can maximize your child’s RESP by putting $2500 at the beginning of the year and the government will match 20% of your contribution which is $500.

You can contribute a lifetime maximum of $50,000 per beneficiary to an RESP. CESG lifetime contribution per child is $7,200. You can continue to contribute to your child’s RESP until he or she turns 17.

Investments in RESP will grow tax free. Any gains in the investments will not be taxed upon withdrawal as long as your child goes to college or trade school and any kind of living expenses, tuition, and books.

When our kids were still young, we set up an E-series funds with TD and contributed $2500 first week of January. The government CESG will normally be credited after a few weeks which was around the end of February or beginning of March.

Make sure you take advantage of this government benefit as it can’t be beaten. You already made 20% return of your investment at the start guaranteed.

My Final Thoughts

These are two of registered accounts that Canadians should take advantage of the beginning of the year. Any investments of these accounts will grow tax free and an excellent way of building wealth.