Retirement » RRSP/RRIF

The difference between accounts and investments

In my workshops, I often get people asking me this question “Am I better off buying an RRSP or a GIC?”

In fact, you can buy a RRSP that is a GIC so you don’t have to do one or the other. An RRSP is a type of account where a GIC is a type on investment. Here’s a quick explanation to distinguish between an account and an investment.

What are accounts?

In my workshops I often describe accounts as ‘buckets of money’ These buckets have different tax treatments. For example, a Registered Retirement Savings Plan (RRSP) is an account. The money get’s put into the bucket, you get a tax deduction. When you take money out of the bucket, you then have to pay tax. As long as the money stays in the bucket, there is no tax to be paid.

Other accounts include Registered Retirement Income Funds (RRIF), Tax Free Savings Account (TFSA), Locked in Retirement Account (LIRA), Registered Education Savings Plan (RESP), and a non-RRSP account

What is an investment?

Inside these buckets, you can choose a myriad of investments. For example, with the money that is in the RRSP bucket, you can invest in many different things like mutual funds, stocks, bonds, GICs, REITs, Income trusts, Exchange Traded Funds (ETFs) and many other investments.

Every account needs to be invested

When you are making personal financial decisions, you have to decide which account or bucket of money is best for your money? I call this the principles of cashflow. Is it better in invest in RRSPs or pay down the mortgage? Is it better to invest in a TFSA or a non-registered account? When should you use a RESP?

Once you have decided which account to use, the next step is to choose the right investment for your needs? Remember that investing is personal and should be based on your personal objectives, risk assessment and time horizons. There is no such thing as a single best investment out there. You must find the best investment for you and your circumstances. A GIC would be ideal for someone who is risk adverse and maybe close to retirement where a penny stock is better for someone likes to take a long shot but can afford to lose the investment. Whatever the investment you choose, start with making sure you are using the right account first.


  1. Jeanneth

    Thank you for this information, it was really helpful.

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