Five (Responsible) Things to Do With Your Holiday Cash

There’s a good chance at this time of year that you could end up with some extra cash in your pocket. It might be a bonus from work, money from a seasonal job, or a gift from a family member. For me, a Christmas doesn’t go by that I don’t get a cheque from my grandmother.

You could use the money to buy something fun for yourself, take your partner out for dinner, donate to charity, or regift it. You could bet it all on black. You could have a party with all of your friends or buy yourself a year-long supply of mac and cheese. There are endless fun things you can do! But this is a personal finance blog, and my job is to lead you away from the glamour of the yellow brick road and down the beige path of responsibility. So come with me on a tour of five responsible things you can do with your holiday cash.

Kick start your RRSP

If waiting a few dozen years to spend your holiday cash sounds like fun, I recommend investing it in a registered retirement savings plan (RRSP).

It’s really easy to put off saving for retirement, and using found money is a great way to get the ball rolling without upsetting your monthly budget. Compound interest means your money will be worth lots more when you retire, and you’ll get a credit on your taxes in the coming year for making the contribution. Think of it as Christmas in April.

Load up your TFSA

If you’d rather put your holiday cash toward a short-term goal, consider investing it in a tax-free savings account (TFSA).

TFSAs are a great way to invest your money because you can choose from a variety of investments, and you don’t have to pay taxes on any interest you earn. Unlike an RRSP, you can withdraw any time without penalty. That makes TFSAs a great way to save for near-term goals, like a new car or a vacation. Or, you can use your TFSA to save for a rainy day.

Give yourself the gift of a high-interest savings account

If you’re really non-committal, you can use your holiday cash to fund a new high-interest savings account.

The everyday savings accounts offered by most big banks pay hardly any interest at all. There are some that pay as little as one-twentieth of one percent interest – you’d be better keeping the money under your mattress (but please don’t).

Instead, save your holiday cash in a high-interest savings account. The best accounts in the market currently pay about 2.30% interest, which is a decent return on investment considering you can withdraw your money for any reason at any time without penalty.