Is buying a home a wise investment?

Investing in the future doesn’t have to mean buying a home

Buy low, sell high: it’s the basic rule of investing. And it’s precisely why so many Canadians, and especially young people, are starting to re-think the importance of homeownership. Put simply, a white-hot housing market is causing prices to soar and forcing many Canadians to dismiss the idea of acquiring a mortgageOpens in a new window in favour of other forms of investment.

And it’s not just acquiring a home that’s proving difficult. Many Canadians who get the home they want are finding the basic costs of homeownership – like making mortgage payments, paying for utilities and shelling out for repairs – tough to manage. The result: many homeowners, and especially younger Canadians, are looking to sell their homes and return to renting.Footnote 1

For Canadians in this kind of situation, the most pressing question becomes “what should I do with my money?”


Tax-Free Savings Accounts (TFSAs) and Registered Retirement Savings Plans (RRSPs) both have their advantages. TFSAs allow you to access funds without paying any tax at the time of withdrawal. That said, their annual contribution limit tends to be lower (the limit for 2019 is $6,000) than the limit on RRSPs.Footnote 2


For those thinking about the longer term, RRSPs may be the better option because they won’t be taxed until the time they’re withdrawn (meaning they may be ideal for people who are currently in a higher tax bracket but expect to be earning less following their retirement).Footnote 3 They also have a higher contribution limit than TFSAs (currently, it’s 18% of earned income, to a maximum of $26,010).Footnote 4

Canadians who decide to rent instead of buying a home should be thinking about maximizing their TFSA contributions and putting as much as possible in RRSPs. Of course, every situation will be different, which is why it’s a good idea to discuss these ideas with a financial security advisor.

Savings accounts

A savings account is one of the more obvious places to stow away money that would have been spent buying and maintaining a home. Most of the major banks offer a variety of savings accounts, some of which qualify as “high interest.”

That said, with interest rates remaining relatively low across the country, it may not be wise to place too much of your savings in these types of accounts. If you do invest in savings accounts, just be clear about the rules, as some accounts will restrict your monthly transactions and charge penalties for going over your limit.

Guaranteed interest options

Guaranteed interest options (or GIOs) are ideal for conservative investors – like Canadians approaching retirement – who are more comfortable with limited but steady and secure returns. For these reasons, GIOs may not be the right fit for young people hoping to generate savings for retirement through investing.

Share ownership programs

In Canada, many companies – both big and small – offer share ownership programs that allow employees to acquire a financial stake in the business. If your organization offers such a program as part of its group retirement and savings package, consider getting on board, especially if your company sweetens the deal by matching your contributions.Footnote 5

Workplace pension plans

If you work for an organization that provides a pension plan, be sure to research it and consider making steady contributions. This is particularly important if your employer matches or even exceeds your contributions to the plan. It’s also worth noting that, compared to the average equity mutual fund in Canada, many workplace pension plans feature lower fees that could help you increase your overall savings and improve your chances of retiring with confidence.

To learn more about these investment options and the others out there, contact a financial security advisor with Freedom 55 Financial. They can help explain which investments make the most sense for your specific financial situation.

Rob Carrick, “Why first-timers should rethink buying in a hot housing market,” The Globe and Mail, April 18, 2017.
Contributions,” Canada Revenue Agency.
Bryan Borzykowski, “How to invest in your 30s,”, April 24, 2017.
MP, DB, RRSP, DPSP, and TFSA limits and the YMPE,” Canada Revenue Agency.
Marjo Johne, “Why you should give your employees a piece of the company,” The Globe and Mail, March 22, 2012.

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