Two of Canada’s major banks are reporting strong demand for the just-launched First Home Savings Account from young Canadians saving for a down payment.
Fixed maturities on bonds and guaranteed investment certificates , or equities in the depths of a market lull, could pose a problem.First, the risk-free return from tax savings make a FHSA a good investment even if it stays in a high interest savings account - especially if those tax savings are reinvested.
RBC is offering FHSAs on its Direct Investing platform for do-it-yourself investors, which includes GICs, high interest savings accounts, mutual funds, exchange traded funds , stocks and bonds.
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Strong Demand for Canada's First Home Savings Account from Young CanadiansTwo major banks in Canada are reporting strong demand for the newly launched First Home Savings Account (FHSA) from young Canadians who are saving for a down payment. The FHSA offers the combined tax benefits of a Registered Retirement Savings Plan (RRSP) and a Tax-Free Savings Account (TFSA). However, the challenge lies in how to invest for a potentially short and shifting time horizon. Contributions in a FHSA can be invested in various options, but they must be ready to liquidate quickly when the account holder makes an offer on a home. Fixed maturities on bonds and guaranteed investment certificates (GICs), or equities during a market lull, could pose a problem. Despite this, the tax perks from a FHSA make it a good investment, even if the funds are kept in a high interest savings account. Contributions are tax deductible, and gains on investments are never taxed as long as the funds are used for the purchase of a first home. The tax savings depend on the performance of the investments, similar to RRSPs and TFSAs.
Source: BNNBloomberg - 🏆 83. / 50 Read more »
Canada's First Home Savings Account Provides Some Help for HomebuyersThe tax-free First Home Savings Account, launched in April, is one tool to assist people in entering the housing market. While it may not solve all their problems, it offers a bit of assistance. Several financial institutions, including Questrade Inc. and Wealthsimple, have made the account available to Canadians. RBC reports that tens of thousands of accounts have been opened since April, with a significant number already reaching the maximum annual contribution. Critics argue that the account may increase demand and home prices without improving affordability.
Source: BNNBloomberg - 🏆 83. / 50 Read more »