Question: I want to save money for a vacation in 12 months. What is the best account type to use in Canada? Should I use an RRSP RESP TFSA RDSP?
Answer: The best account type to use in Canada for saving money for a vacation would likely be a Tax-Free Savings Account (TFSA). TFSAs are flexible and allow you to withdraw money at any time without penalty, which can help save for a specific goal, such as a vacation. Contributions to a TFSA are not tax-deductible, but the investment income earned in the account (including capital gains and dividends) is not taxed when withdrawn. A Retirement Savings Plan (RRSP) is typically used for retirement savings, and contributions are tax-deductible, but withdrawals are taxed as income. A Registered Education Savings Plan (RESP) is used for saving for a child's post-secondary education, and the government provides a grant based on contributions up to a limit. A Registered Disability Savings Plan (RDSP) is for an individual who has a disability and is eligible for government grants and bonds and generally not for saving for a vacation. It's important to consider your personal financial situation and goals when choosing an account type, and you may want to consult a financial advisor to determine the best option for you.
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