Building Wealth: A Simple Starting Point

When you’re coming out of a bankruptcy or consumer proposal, the idea of “building wealth” can feel far off — or even unrealistic. That’s normal. Building wealth isn’t entirely about investing or taking risks. It’s about creating options for your future by setting aside money in the right places, at the right time, for the right reasons.

Step One: Free Up Cash

Wealth starts with having extra cash each month.

That’s why the first steps were:

  • Dealing with unmanageable debt – that’s why you filed a bankruptcy or consumer proposal
  • Creating a Money Plan that balances income and expenses – refer to our budgeting section if you haven’t done this yet
  • Building a starter emergency fund

Once your income is consistently higher than your expenses — even by a small amount — you’re ready to think about longer-term savings.

Step Two: Decide What You’re Saving For

Before choosing where to save, be clear on why you’re saving.

Your goals might include:

  • Taking a vacation
  • Buying a home
  • Replacing a vehicle
  • Saving for retirement
  • Helping your children with education
  • Long-term security for yourself or a family member

You don’t need to decide everything at once. Start with one or two priorities and adjust over time.

Saving works best when each dollar has a purpose.

Step Three: Choose the Right Type of Account

There are many possible containers that can hold your savings. We do not provide investment advice — this is about understanding the accounts themselves. What options you choose depend on your goals.

High-Interest Savings Accounts (HISA)

A high-interest savings account is the most basic and flexible place to store money. This is usually the first container people use when rebuilding. It keeps things simple and avoids unnecessary complexity early on.

Key features:

Often a good choice if:

  • You are just starting to save
  • You are building or replenishing an emergency fund
  • You want quick access to your money
  • You are still getting financially stable after insolvency

Important to know:

  • Interest rates can change
  • Interest is taxable (this matters more as balances grow)
  • This is not designed for long-term wealth growth — it’s about safety and access

For many clients, a high-interest savings account is the right place to hold money until goals become clearer.

Tax-Free Savings Account (TFSA)

A TFSA allows your money to grow tax-free.

Key features:

  • Contributions are not tax deductible
  • Withdrawals are tax-free
  • It provides flexible access to your money

When should you use a TFSA?

  • You are building savings beyond your emergency fund
  • You’re saving for a car, home down payment, or future needs
  • You are already retired, and don’t have the need to contribute to an RRSP

Important to know:

  • The government limits how much you can contribute each year
  •  If you are at your lifetime limit and you take money out, you must wait until next year to start contributing again, so a TFSA is not a good way to save for day to day expenses.

Resources: Government of Canada website explaining TFSAs

Registered Retirement Savings Plan (RRSP)

An RRSP is designed specifically for retirement savings.

Key features:

  • Deductible RRSP contributions can be used to reduce your income tax
  • Any income you earn in the RRSP is usually exempt from tax as long as the funds remain in the plan
  • You generally have to pay tax when you receive payments or withdrawals from the plan

When should you use an RRSP?

  • You’re saving for retirement and have extra cash. If you don’t have extra cash each month, contributing to an RRSP should not be a priority over your monthly bill payments (rent, utilities, etc.)
  • Your employer offers RRSP matching (free money)

Important cautions:

  • If you are currently bankrupt, Hoyes Michalos will file your tax refund for the year of bankruptcy, so if you filed bankruptcy in 2026, you will lose all tax refunds for the entire 2026 year. So it may not make sense to contribute to an RRSP during the year of bankruptcy, because any additional tax refund you generate will be distributed to your creditors. If you have savings, keep them in your savings account or open a TFSA.
  • RRSPs are not ideal for short-term savings
  • Withdrawals create taxable income

Your Licensed Insolvency Trustee or credit counsellor can help you decide when RRSP saving makes sense.

Resources: Government of Canada website explaining RRSPs

Tax-Free First Home Savings Account (FHSA)

Tax-Free First Home Savings Account is designed to help first-time home buyers save for a down payment and received a tax deduction while doing so.

Key features:

  • Contributions are tax deductible (like an RRSP)
  • Withdrawals (when you buy a house) are tax free (like a TFSA)
  • There are annual contribution limits (up to $8,000) and lifetime limits (maximum $40,000)
  • One time only; you can only use a TFFHSA to buy one home in your lifetime;
  • You can invest in stocks, bonds, ETFs, GICs (like a self-directed TFSA or RRSP)
  • Can remain open for 15 years, or until you turn 71 years old.

When should you use an  FHSA?

  • You or your spouse have never owned a home, or haven’t owned a home in the previous four years
  • Saving for a home is a greater priority than saving for retirement, or for your children’s education;
  • You are confident that you can purchase a home within 15 years

Resources:

Registered Education Savings Plan (RESP)

An RESP helps you save for a child’s post-secondary education tax free. You contribute money, and when your child starts post secondary education they can draw out the money.  The student pays tax on the withdrawals, but since they are in a low tax bracket (because they are a student), they often pay little or no tax.

Key features:

  • Contributions are not tax deductible
  • You don’t pay tax on income growth while the money remains in the fund
  • There are lifetime limits per child
  • Government grants are available
  • Withdrawals are taxed to the student (often at a low rate)

When should you use an  RESP?

  • You want to help a child with future education costs
  • You are eligible for education grants

Resources: Government of Canada website explaining RESPs

Registered Disability Savings Plan (RDSP)

A Registered Disability Savings Plan (RDSP) is a savings plan that is intended to help parents and others save for the long term financial security of a person who is eligible for the disability tax credit (DTC).  

Key features:

  • You can only begin making contributions after your child is diagnosed with an eligible disability.
  • Contributions to an RDSP are not tax deductible and can be made until the end of the year in which the beneficiary turns 59.
  • Significant government grants and bonds may apply
  • Contributions that are withdrawn are not included as income to the beneficiary when they are paid out of an RDSP

Often a good choice if:

  • You or your child qualify for the Disability Tax Credit
  • Long-term financial security is a concern

If your child is disabled but is also likely to attend post-secondary education, some thought should be given to contributing to both an RESP and and RDSP, based on your resources.

Resources:

Putting It All Together

You don’t need to use every savings account.

Most people start with:

  1. Emergency fund
  2. TFSA for flexible savings
  3. Then consider RRSP, FHSA, RESP, or RDSP based on goals

Your savings strategy should grow with your life, not all at once.

Building wealth after insolvency is not about speed — it’s about stability.

Start small. Be consistent. Revisit your goals once or twice a year.

As your situation improves, you’ll have more choices — and that’s what real financial recovery looks like.