I just recently graduated from law school and I want to start investing my money (even though my salary as a student is low!). I have no idea where to start. Please help!
Asked by A., Etobicoke, ON
Congratulations on starting this new phase of your life! You are in the optimal time to start building wealth and laying a foundation for your future.
To start, I would suggest opening a Tax Free Savings Account (TFSA). You are allowed to invest $5,000 annually. If you contributed in 2011, you are able to contribute $5,500 after January 1st, 2012 (this number is indexed to inflation and rounded to the nearest $500 - thus the increase in 2012). The great news: your investments can grow tax free in this account. If you had to dip into your TFSA account, there wouldn't be any penalties - only a commission to sell your investment holdings.
Alternatively, if you opened an RRSP and had to withdraw from it, you would have to pay a minimum 10% deregistration penalty and a commission. So, it might be prudent to look at the TFSA in the short term. When you become a full-time lawyer and get paid a higher salary, I would then suggest putting money into an RRSP to get the tax deduction and keep it in that account for long-term growth.