Is free money too good to be true?
If someone comes up to you and offers you free money, no strings attached - what would you do?
I know. You’d probably keep walking in the other direction…But here’s the thing:
There is actually a ton of free money available to most Canadians just waiting to be taken advantage of.
But first - let’s answer a couple of questions...
Where does (legit) free money come from?
It could come from the government, your employer, a business looking for new customers - or simply by choosing to give your bank less money (because they have enough of it for goodness sake!).
What do I require from you to get access to all this money?
The willingness to spend a little time and take ACTION. You need to get organized and follow through on making some simple changes to your life. Then, watch the free money and savings start rolling in.
If that sounds good to you - then let’s get started.
A Note About Claiming Your Free Money
Don’t let this long post intimidate you.
I’ve covered a wide-range of topics - and tried to provide as much actionable information as I can. Feel free to bookmark this list or email it to yourself so you can chip away at them one at a time...
If you’re serious about getting free money, this post is a great starting point. Please remember though - I am not a financial advisor. I suggest you do additional research and speak to a professional to ensure you make the right financial decisions for your situation.
1) Max Your Employer RRSP Matching
Many employers have an investment matching program where they match your own contributions up to a certain percentage of your salary - often between 2% and 4%. The match is often a 100% match, but can also be a 50%, 25%, or other match percentage.
Example: you make $50,000 per year and your employer offers a 50% match on contributions up to 3% of your salary. In this case, you would contribute the maximum of $1,500 of your own money each year and your employer would give you a free $750 to contribute as well for a total contribution of $2250.
People come up with all kinds of excuses for turning this money down:
- “I can’t afford to invest right now”
- “The investment choices offered by my company plan have high fees”
- “I can’t be bothered to open an account”
- “I might need the money - I can’t lock it up in my RRSP”
Listen up. Don’t be one of those people. Turning down this kind of free money is crazy talk.
You can hold almost anything inside an RRSP, including cash if you are scared of investment risk. If they won’t allow you to do that, look for a “money market fund”, which is also basically cash.
If you don’t like the investment choices, put the money in cash, get the match from your employer, then transfer the money out to the investment company of your choice every year or so. There will be a small fee for doing so, but it will be MUCH less than you made from your employer match.
Let’s bust this myth. It’s common to hear people say that you can’t take money out of your RRSP before retirement without penalty. In fact, you CAN withdraw that money any time you feel like it. There will be a “withholding tax” to pay immediately when you do it, but that is just to pay for the expected income tax you will have to pay at tax time. You will get that money back when you file your taxes if for some reason you paid too much.
Tip: A great time to withdraw from your RRSP is actually during a low income year - like if you lose your job or if you decide to go back to school. Here’s why...
Whatever you withdraw will get tacked on to your income for that year and you pay tax at your marginal tax rate. This works exactly the same as it does in retirement. If your income is low, your tax rate will also be low - or even nothing if you earn less than around $10,000 that year.
Years ago, I was laid off from my job and decided to work on my business for a few months. I withdrew money from my RRSP even though I didn’t need it because it was tax-free for me to do so.
2) Employer Stock Contributions
Investing in your employer’s own stock is actually a pretty BAD idea unless you are 100% certain the company will do well. (And no one can be certain of that).
Why is it a bad idea? It concentrates your risk in one place for both your primary source of income and your investments. We never want to put ALL our eggs in one basket. Ever.
That said, if the company gives a decent match like 25% for purchasing their stock, then my opinion is to still do it. But I’d proceed carefully...
I’d sell the stock as soon as I could before the stock price has a chance to fall. I’d either withdraw the money or reinvest it in something else.
3) Use ALL Your Insurance Benefits
Either you or your employer are paying dearly for the insurance coverage you probably have through work - you need to make sure you actually use it. It isn’t just for emergencies, there is plenty of coverage you can use day to day.
Vision coverage - typically resets every 2 years, so make sure you get an eye exam done and order new glasses or contacts at least that often. To stretch your coverage, watch this video I did about saving money on glasses with Clearly.ca.
Massages - if you play your cards right, you can actually get paid to go for a massage. Getting a doctor’s note for massage therapy is easy - you don’t even need to have a physical ailment. Simply tell your doctor you want to go for “general well being” and that should be good enough.
Dental coverage - don’t forget to go for your annual dentist visit and ask how much scaling your plan covers. You might be able to go ever 3 or 6 months to get your teeth cleaned. Good free dental hygiene now could save you a lot of money later in major dental surgery.
There are plenty of other ways to take advantage of your insurance - read your policy and get creative with it.
Tip: If you’re hardcore, insist on paying for everything with your credit card and then submit your receipts and forms manually for reimbursement and you’ll also earn additional rewards on these free money purchases.
The Downside: the insurance company will ensure it remains profitable and will eventually raise premiums if your entire group makes way too many claims.
4) Stop Paying Extra Tax On Your Money
We pay plenty of tax on our employment income here in Canada before our money even lands in our bank accounts - so why pay even more tax on the money that after tax money earns?
The Canadian government has created two types of tax sheltering accounts to help you either defer taxes until retirement (RRSP) or stop paying any tax at all on all new income generated from money you’ve already paid income tax on (TFSA).
I will reiterate, you can hold almost any type of investment in an RRSP or TFSA - even cash. The RRSP isn’t just for stocks or mutual funds to be invested for retirement and the TFSA isn’t just for traditional savings accounts.
You can withdraw money from these two types of accounts any time if you need to. There are tax implications with the RRSP for doing so, as mentioned in the first point. But, that’s only because the government already reduced your income taxes the year when you made your contributions - they’re just taking the temporary tax break they gave you back.
Tip: Stop letting your money sit in a savings account earning interest that you should be paying income tax on while you have available TFSA contribution room. Secondly, don’t invest outside of a TFSA or RRSP if you have room left in either.
Here’s a rule of thumb: If you are young and expect your income to rise, start by investing in your TFSA and save your RRSP for high income years when you can get a much bigger percentage tax break.
Later on you can balance your TFSA and RRSP withdrawals in retirement (or when you need the money) to minimize your reported income - and consequently your taxes. RRSP withdrawals count as income and TFSA withdrawals do not so you can keep yourself in a low tax bracket while still having plenty of money to live on.
5) Take Advantage Of Government Programs
Canada is known for being a socialist country the provides plenty of assistance to the people who are most in need - but there are also plenty of programs available to everyone.
Grants and programs are typically offered by both the federal and provincial government. They range from tax deductions, to extra income, to one time grants for a whole host of different reasons.
The hardest part about these programs is finding them.
Tip: The Canadian government has created a Benefits Finder that allows you to fill in your details and it will spit out which benefits could apply to you. It includes provincial programs as well, which makes it much more useful.
6) Tuition Rebates And Grants For Students
It was popular in recent years for some provinces to offer tuition rebates to students who opted to stay and work in their home province after finishing their education.
For example, New Brunswick recently offered up to $20,000 back up to a maximum of 50% of your tuition paid. The way it worked is that any New Brunswick income tax you paid or owed would be completely refunded to you each year until 50% of your tuition was paid for.
My wife was able to use this program when she went back to school to change careers and it saved us many thousands of dollars on her tuition.
Tip: To see if any programs are currently being offered in your province Google “tuition rebate in (province name)” and see what comes up.
7) Use The RESP To Get Free Money For Your Kids
First let me say that there are a lot of scammy RESP programs out there that charge massive fees and suck away 100% of your initial contributions for the first several years. Please do your due diligence and avoid all of those.
Open a regular RESP investment account with a well known financial institution instead.
The government will match 20% of your contributions to an RESP account up to a maximum of $500 per year. The lifetime maximum is $7,200. This is known as the “Canada Education Savings Grant (CESG)”. You can get up to an additional $100 in grant money per year if you are a lower income family but the lifetime maximum remains the same - you’ll just get there quicker.
If your child is older and you have started late - there is an opportunity to double up your yearly contributions and grant money to catch up.
You are investing after tax money into an RESP, so any contributions you make can later be withdrawn and given to the student or yourself tax free any time. That means if you need the original money you contributed back, you can get it.
All grant money from the government and extra income earned by investing are not taxed until they are withdrawn and given to the student after they are enrolled in a qualifying educational program. This money must go to the student and not yourself as long as they decide to enroll in an eligible education program.
Grant and investment income money (but not contribution money) will be taxed at the student’s marginal tax rate when it is withdrawn - which is often 0% because students usually don’t earn much income.
What If they end up not being eligible to receive the grant money and investment income known as the educational assistance payments (EAP)?
Then, you can withdraw the money yourself after proving they are ineligible when they are old enough. These are called accumulated income payments (AIP) and are subject to your marginal tax rate + an additional 20% tax so the government can recuperate the 20% CESG it initially gave.
Tip: Remember, just like the RRSP and TFSA, you can hold any type of investment in the RESP, including cash.
If you want more information, here is the government’s RESP page.
8) Take Every Tax Deduction You Can
The Canadian Income Tax Act is a confusing mess - but hidden in there are plenty of deductions that can be taken advantage of by all of us.
These deductions can easily add up to thousands of dollars in free money for you every year depending on your personal situation.
Tip: Using a good tax program like UFile or SimpleTax (free) will help you catch most of the deductions you are eligible for. Talking to a qualified accountant will help you ensure you aren’t missing anything even if you only do it one year to get your head on straight.
Mentioning all the available deductions here would be impossible, but check out my ultimate guide to saving money on taxes to see most of them.
9) Free Money To Help You Save Money On Energy Costs
Green energy consumption has become huge over the last decade and the best part of going green is that it typically reduces your monthly energy bills substantially.
It can be worth it to upgrade your house with new heating systems, low power consumption light bulbs and devices, improved insulation, and more on your own dime. Doing it (partially) on someone else’s dime is even better!
There are many government and utility company programs that will chip in some money to help you increase the efficiency of your home to lower your energy costs.
For instance, a heat pump is 3-5 times more efficient than an electric baseboard. Yes - you read that right. You can lower your heating costs by as much as 80%. In reality, your savings will be less - but still significant.
Heat pumps use a small amount of energy to operate a heat exchanger which transfers heat from one location and places it in another.
Since heat is really just molecules moving/vibrating, even cold outdoor or underground temperatures still have heat that can be extracted by a heat pump and moved inside your house in the winter. And in summer, heat can be extracted from the air inside the house and transferred outside.
The easiest heat pump to install is a mini split heat pump that basically just involves cutting a hole in an exteriour wall to heat/cool a single area of your house. Each one costs a few thousands dollars but will save you a lot in monthly energy costs to eventually pay for itself.
Tip: A grant can mitigate some of this cost to make the upgrade more affordable.
For instance, NB Power (owned by the government of New Brunswick) is currently offering a $500 rebate to homeowners who purchase and install a mini-split heat pump through an approved contractor.
To find out what rebates and grants are available in your province, here is a breakdown by province from Natural Resources Canada.
10) Credit Card Cash Back Rewards
I’m a huge fan of credit card rewards for earning some free money on your everyday purchases and bills.
Travel rewards credit cards often offer the highest rewards but can be confusing and restrictive to use without investing a little time to figure them out.
A more convenient choice for most people is get a top cash back credit card to earn cash back on every purchase charged to the card. Choosing the right one is important though because you can easily earn 4x more cash with the best cards vs. the worst ones.
Personally, I was able to earn $1,052 worth of cash in 2015 for purchases I made in 2014 and 2015 using the top card.
Warning: this only makes sense for people who can use credit responsibly, not overspend, and pay of their bill in full every month. If that isn’t you - please avoid using credit cards.
11) Online Shopping Cash Back
You can get cash back at most online stores in addition to what you already get with your credit card. Cash back ranges from 1% to as high as 50% - but is typically less than 10% for most popular stores.
The cash back is funded out of the marketing budget of the store you are shopping at. They will pay a percentage of your purchase to whatever website referred you. Instead of keeping all the commission for themselves, cash back websites will give the lion’s share back to you and only keep a little for themselves.
All you do to earn cash back is log into the cash back site (after creating an account) before making a purchase, search for your favourite online store using their search box, then click their link to bring you to that store’s homepage. From there you just continue shopping like normal and your cash back will automatically be credited when you make a purchase.
How do I get paid, you ask? They will either send you a PayPal payment (sign up for PayPal here) or cut you a cheque after the cash back goes through an approval period - usually 60-90 days.
Tip: My favourite Canadian cash back site is Great Canadian Rebates because they consistently offer the highest cash back payouts. They’ll even give you $2.50 free just for signing up.
Ebates is the other popular Canadian cash back site. I’d suggest creating an account with them too for two reasons: they give you a $5 bonus for signing up and you can check and see if they have a higher payout than Great Canadian Rebates at some stores.
12) Stop Overpaying On Your Debt
If you have debt, shopping around for good interest rates should be one of your top priorities.
Credit card debt should be abolished never to return as fast as possible.
No one should be paying 20%+ on their debt. I wrote this article on how to reduce consumer debt interest that will walk you through how to get your credit card debt down as low as 0%. If you go from 20% down to 0% on $10,000 in credit card debt, that’s like $2,000 free money in your pocket every year.
If you have a big mortgage, you are paying an insane amount in interest even if rates today are the lowest in history. Savings of 1 to 2% are quite possible off the posted big bank rates. Surprisingly, on a $300,000 mortgage paid off over 25 years, a difference of 2% will save you almost $100,000 in interest charges.
Tip: You can compare mortgage rates online and lock in a low rate before they start to rise.
13) Stop Overpaying For Your Investments
Many Canadians invest in mutual funds not really knowing much about them because they are easy to invest in.
Unfortunately, Canada has among the highest fees in the world when it comes to investment products. It’s not uncommon to see fund management fees called Management Expense Ratios (MERs) of 2.5% or more.
The real crime is that many (but not all) of these funds barely have any actual management involved. The company just buys a diversified set of stocks that tracks an index and sits back and collects their fat cheques coming in from your hard earned savings.
There is a low cost DIY approach called indexing that allows you to take those 2.5% fees and drop them to about 0.2%.
In this article warning you about crooked financial advisors, I showed that a 2.2% difference in fees on a $250,000 portfolio can add up to $1 Million dollars in lost money over a period of 30 years thanks to negative compounding.
Now you might say “surely the ‘experts’ managing your money can outperform an index by picking the right stocks at the right time?”
Sure, that can happen. But it’s largely NOT the case.
Study after study has shown that even most highly trained portfolio managers fail to outperform the index after their fees are deducted from the profits.
Tip: If you want to learn more about DIY index investing, I would suggest reading a couple of Canadian personal finance books to get a foundation and then checking out these model portfolios from Canadian Couch Potato so you know exactly what index funds to buy.
I know you could make good use of an extra $1 Million in free extra money for your retirement. And frankly, so could I.
14) Increase Interest On Your Savings
With interest rates on savings accounts at the big banks being as low as 0.05%, you really aren’t earning anything on your cash savings and emergency funds.
A few of the big 5 banks have upped rates in the face of increased competition from smaller players. But you’re still better off looking elsewhere.
With a virtual bank - that still protects your money through the CDIC - you can achieve interest rates of up to 2%.
Tip: You can simply link up your high interest savings account with your chequing account and transfer money back and forth between the two in a couple of business days as needed.
Check out this list of top high interest savings accounts rates to see what’s possible. My personal favourite is Tangerine which is offering 2.4% for 3 months and 0.8% after that - plus up to $50 in cash bonuses to boot. They don’t have the highest rates, but they have no fees, a great online interface, and plenty of convenient features.
Free money is real - it’s a thing - and it’s out there ready for you to take hold of.
My question is this:
Will you invest a little time to put some of it in your own pocket? Or are you just going to leave it all just sitting there on the table?