Did you know that Canada is one of the most financially literate countries in the world1 However, like all things, there’s still plenty of room for improvement. Especially since the pandemic revealed just how unprepared Canadians were for a financial crisis. In fact, almost half (45%) say the COVID-19 has had some impact on their level of financial stress.2 Maybe a higher financial IQ could have helped lessen the financial impact of the pandemic?

There just may be a brighter side to the pandemic. It's made more young Canadians focus on protecting their financial future.3 And, like most things, the more you know, the better prepared you’ll feel to take the next step. In this case, that step might be toward financial freedom. 

Increase your financial literacy in under 30 minutes

In this series of videos, we’ll explain insurance, savings and investment terms – simply. Pick a few topics or watch them all to boost your financial know-how.

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What is an RRSP? | Watch time: 1min 23 seconds

A registered retirement savings plan (RRSP) is a type of savings account to help you save for retirement. See how it works. Watch now.

What is an RRSP?

Simply put, a Registered Retirement Savings Plan, or RRSP, is a type of savings account that helps Canadians save for their retirement.

How does an RRSP work?

You can hold a variety of investments in your RRSP, like:

Any contributions or growth within your RRSP help you defer taxable income. This means you can defer taxes this year when you contribute, and defer taxes on any investment growth, until you choose to access the funds. For most, withdrawing from your RRSP at a later point in life means paying less tax.

Think of it this way: you’ll probably be in a lower tax bracket when you’re retired in your 60s or 70s. So you’ll be paying less tax when you withdraw from your RRSP at that age.

What’s your RRSP contribution limit?

Your yearly contribution limit is 18% of your earned income, plus unused room from earlier years. Any money you put into an RRSP, up to the limit, reduces your taxable income for that year.

Your RRSP contribution limit is calculated each year and will appear on the Notice of Assessment you receive after filing your taxes.

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What is a TFSA?  | Watch time: 1min 36 seconds

A tax-free savings account (TFSA) is a type of savings plan that can help save for just about anything. See how it works. Watch now.

What is a TFSA?

Simply put, a tax-free savings account, or TFSA, is a type of savings account to help save for any need.

How does a TFSA work?

A TFSA doesn’t have to be a savings account at a bank. A TFSA can contain a variety of investments like:

  • bonds,
  • stocks,
  • mutual funds, and
  • exchange-traded funds.

Money, or contributions, that you put into a TFSA, are made with after-tax dollars. This means you’ve already paid income tax, and won’t need to pay again when you make withdrawals in the future. Plus, you won’t pay tax on any investment growth in your TFSA.

Whether you’re saving for a dream vacation, your first home, or your retirement, a TFSA can help.

What is your TFSA contribution limit? 

A contribution limit is the maximum amount you can add to your TFSA each year. The annual  TFSA contribution limit varies from year to year. The federal government determines these limits.

You’re entitled to the lifetime contributions for every year after you turn 18 and are a Canadian resident. For example, let’s say you don’t have a TFSA and were 18 in 2009, when the government introduced the TFSA. In this case, if you were a Canadian resident throughout that entire time, you’d have full contribution room available. But if you became a Canadian resident in 2015, you’d start gaining contribution room then. The best way to find out how much you can contribute to your TFSA is through the Canada Revenue Agency.

Whenever you need it, a TFSA is a smart way to save, and see your savings grow – tax-free.

Find more tips and tools at sunlife.ca.

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What is critical illness insurance? | Watch time: 1min 44 seconds

Critical illness insurance gives you money if you become seriously ill. That way, you can focus on your health and not your finances. See how it works. Watch now.

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What is term life insurance? | Watch time: 1min 25 seconds

Term life insurance provides protection for a certain "term" of years. See how it works and why it’s a good way to protect your loved ones from worry. Watch now.

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What is a mutual fund? | Watch time: 2mins 3 seconds

A mutual fund invests in a group of stocks, bonds, or other investments. See how it works. Watch now.

What is a mutual fund?

Simply put, a mutual fund invests in a group of stocks, bonds, or other investments selected by a professional fund manager. The team managing a fund: 

  • has experience selecting investments, and
  • manages buy-and-sell decisions so you don't have to.

How do mutual funds work?

When you buy units of a mutual fund, you're pooling your money with other investors. If you're a small investor, this lets you have a much wider mix of investments than you could on your own.

Why invest in mutual funds?

Mutual funds are simple to buy and often have a low minimum investment. They can give you an easy way to diversify your portfolio. That means including variety – a mixture – in your collection of investments.

What is a diversified portfolio, and why is it important?

A diversified portfolio includes various types of investments, like stocks, bonds and cash. Investments may react differently to the same economic event, for example, higher inflation.

Over time, some investments will increase in value, while others will decrease. So, having a mix of investments can help you minimize risk and potentially achieve better results.

What are the main types of mutual funds?

The three main types of mutual funds are:

  1. equity funds, that invest primarily in a variety of different kinds of stocks;
  2. fixed income funds, that invest primarily in bonds; and
  3. balanced funds, that invest in a mix of stocks, bonds and similar investments.

There are many different categories of mutual funds to choose. Some invest in certain industries, others in certain countries, while still others invest more widely.

Find more tips and tools at sunlife.ca.

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What is permanent life insurance? | Watch time: 2mins 10 seconds

Permanent life insurance provides coverage for your entire life and pays your loved ones when you die. See how it works. Watch now.

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What is an RESP? | Watch time: 1min 32 seconds

An RESP is a type of savings account to help save for a child's education after high school. See how it works. Watch now.

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What is an insurance GIC? | Watch time: 2mins 18 seconds

An insurance GIC (or accumulation annuity) is a unique way to save money that's safe and guaranteed. See how it works. Watch now.

What is an insurance GIC?

Simply put, life insurance companies offer a unique way to save money that's safe and guaranteed. It's called an insurance GIC, or an accumulation annuity.

An insurance GIC provides the security of knowing you can protect your savings and guarantee your rate of return, with the additional benefits of an insurance contract.

How does an insurance GIC work?

To start, you choose the amount to invest and how long you want to invest it. Your insurance GIC grows with interest until the end of the term you set, called the maturity date. At the maturity date, you get back your original investment, plus all the accumulated interest.

With an insurance GIC:

  • growth is predictable, and
  • you don't have to worry about market ups and downs.

What are the benefits of an insurance GIC?

An insurance GIC has many of the same features as a regular GIC. Like a GIC, it provides a guaranteed rate of return over a fixed period. But because it's an insurance contract offered by an insurance company, there are additional benefits.

With an insurance GIC:

  • You can name a beneficiary even on non-registered funds. That way, when you die, the money will go directly to your loved ones. This helps avoid potential delays and costs involved in settling an estate.

  • Beneficiary names are kept private. Normally, money that flows through a probate estate becomes public record. But, with an insurance GIC, money is paid directly to the beneficiary. This helps families avoid having to make decisions about how the money is divided. Note that probate isn’t required in Quebec.

  • Your deposits are protected. Since an insurance GIC is an insurance contract, you’re covered by Assuris, a not-for-profit organization that protects policyholders if their life insurance company fails. You can learn more about Assuris by visiting assuris.ca.

There are many other benefits to insurance GICs. An advisor can show you how an insurance GIC can work for you.

Find more tips and tools at sunlife.ca.

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What is long-term care insurance? | Watch time: 2mins 40 seconds

Long-term care insurance provides an income-style benefit when you become dependent. See how it works. Watch now.

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What is a payout annuity? | Watch time: 1min 14 seconds

A payout annuity is an easy way to convert savings into regular income payments for life. See how it works. Watch now.

What is a payout annuity?

Simply put, a payout annuity is an easy way to convert some of your savings into regular income payments. A life annuity, a type of payout annuity, can help provide a steady source of income throughout your retirement.

How does a life annuity work?

You buy a life annuity from an insurance company, which calculates your payments based on:

  • the amount of savings you’re converting,
  • long-term interest rates, and
  • the life expectancy of a person your age and gender.

Then, you can enjoy the financial security that comes from knowing you’ll get guaranteed income payments for life.

What other types of payout annuities can you buy?

Is a life annuity right for you?

A life annuity is helpful if you:

  • want guaranteed income to pay ongoing fixed expenses in retirement,
  • don't want to make any more investment decisions, or
  • want to avoid the risk of outliving your money.

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What is an employee pension plan? Watch time: 2mins 40 seconds

If you have an employee pension plan, it’s likely one of two kinds. Find out how they work. Watch now.

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What is a RRIF? | Watch time: 2mins 11 seconds

A registered retirement income fund (RRIF) is a way to convert an RRSP into retirement income. See how it works. Watch now.

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What is asset allocation? | Watch time: 2mins 24 seconds

Asset allocation is an investment strategy. See how it works. Watch now.

Asset allocation can be an effective way to help manage risk in your investment portfolio.

Simply put, it’s a strategy that involves selecting a mix of investments appropriate to your risk tolerance, time horizon, and financial goals.

What are the most common types of investment assets?

The most common types of investment assets, or asset classes, are:

  • cash equivalents,
  • fixed income securities, such as bonds or bond funds, and
  • equity securities, such as stocks or equity funds.

Each asset class is expected to have different levels of risk and return characteristics. So each will behave differently over time. For example, stocks are typically considered riskier than bonds, but they also offer the potential for higher returns over the long term.

There’s no predicting how well your investments will perform or how steady your returns will be. That’s why it’s important to diversify your portfolio.

What are your asset allocation options by age as an investor?

Are you a young investor saving for retirement? Then you may have plenty of time before you're likely to withdraw the funds. You may consider allocating more of your portfolio to equities. One option would be a split of 70% equities to 30% fixed income.

Are you getting closer to retirement? Then you may want the comfort of a more income-oriented portfolio, with say, maybe only 40% equities and 60% fixed income, even if it means giving up some of the potential for higher growth in exchange for lower, steadier returns.

Diversifying your portfolio over time by increasing the fixed income allocation and decreasing the equity allocation may keep your portfolio stable as you approach goals, such as retirement.

Did you know you can further diversify your portfolio by selecting a mix of securities within each asset class? For example, there are different types of securities according to locations, industry branches, or investment styles.

Because investments within various asset classes may behave differently, it’s a good idea to review and rebalance your portfolio regularly.  That will help ensure it holds the right asset mixed, based on your current values, tolerance for risk, time horizon, and financial situation.

Find more tips and tools on sunlife.ca.

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Should you consolidate your savings? | Watch time: 1min 58 seconds

See how consolidating your savings can make managing your investments simpler. And, may mean more money in the long run. Watch now.

De-stress by getting professional help with your finances

Did you know that people who don’t work with an advisor are far more likely to say money causes them stress? 4 Now’s the time to de-stress.

And after watching these Simply Put videos, you’re likely more prepared to talk to an advisor about insurance, savings and investments. Find your match.

Read more:

This article is meant to only provide general information. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.

1 The Financial Consumer Agency of Canada, Review of Financial Literacy Research in Canada, 2020.

2 FP Canada™ Financial Stress Index, 2021.

3 Sun Life Financial Canada, Ipsos Survey, 2021.

4 FP Canada™ Financial Stress Index, 2021.