Top 5 important financial products to Consider

We all really don’t need to be born with a treasure to build our wealth. With the selection of right products, we can grow and protect our healthy wealth. Here are five important financial products that one should consider while building a financial plan:

1. Registered Retirement Savings Plan (RRSP)

As soon as start working in your life, whether you work as an employee or have your own business, you should have a registered retirement savings plan (RRSP). It’s one of the most tax-efficient ways to save for your retirement. Based on your income level you’re allowed to contribute up to 18% of your earned income from the previous year to a maximum of $23,820 for 2013. If you’re a member of a group pension plan, your contribution room is reduced. All the contributions you made towards your RRSP are tax deductible, which means that you can expect a attractive tax refund while building your savings. Moreover it is also a wise way to recharge your RRSP savings by putting that tax refund back into it.

2. Tax-Free Savings Account (TFSA)

TFSA are the relatively new to the investment world in Canada. TFSA was introduced by the federal government in 2008, TFSA let you save up to $5,000 a year (now $5,500 starting in 2013). The contributions you make towards TFSA aren’t tax deductible, however there’s no tax payable on investment growth and withdrawals are also tax-free.

A TFSA is an ideal savings tool for both long-term and short-term goals such as a vacation or home renovation. Also, for younger Canadians who haven’t yet reached their earning years, a TFSA is a great way to start saving for the future.

3. Life insurance

While the above two help you in building your wealth, you also need a protection for your financial future and family wellbeing. Life Insurance brings protection to your wealth and family when you are not with them. Depending upon the plan you select, Life insurance can be a smart tool to protect and build your wealth. Moreover it can also be used to protect your mortgage payments and preserve your wealth.

4. Critical illness and Disability Insurance

It’s important to not only have life insurance but to also ensure that you’d be financially protected should you ever become unable to work due to illness or injury. If your workplace benefits provide do not provide you adequate coverage (which is most of the cases), you need an extra protection when something happens to you and your family.

Critical illness insurance helps pay the costs associated with a life-altering illness such as cancer or a stroke. You receive a lump sum payment if you become critically ill and you decide how you wish to spend the money. Disability insurance protects you from a potential loss of income due to injury or illness. You receive a recurring monthly payment to cover ongoing financial costs. Even if you have workplace group disability benefits, it’s often wise to have your own personal policy to provide you with additional coverage.

5. Registered Education Savings Plan (RESP)

Having an RESP account is must if you have kids. It’s a dedicated savings account that lets you save for your kids’ education after high school. Income earned inside the plan accumulates tax-free until it’s withdrawn and then it’s taxed in the hands of the child (meaning usually no tax is payable). Not opening an RESP to save for your child’s education means you’re also turning down free money. The Government of Canada matches 20% of your annual contributions up to a maximum of $500 per year to a lifetime maximum of $7,200 per child. This is really a big boost in your savings and securing for your kids future.