RRSP or pay down the mortgage? Anyone with credit-card debt at 20 per cent per year should not be making an RRSP contribution.

The reason we hardly ever hear a straight recommendation like this is easy: It does not make money for financial institutions. They make money off your debts as well as your investments. That is why RRSP loans are so popular and relatively easy to get. The banks win both ways - they earn interest on your loan and fees on your investments. It's win-win for them, but lose-lose for you.

How can you make a rate of return by paying off debt? Think of it as the absence of a cash out-flow, which is as good as a cash inflow and even better if the inflow is taxable. Someone with a revolving credit-card balance of $10,000 will pay $2,000 annually in interest at 20 per cent. If the debt is paid off, the $2,000 will no longer be flowing out.

If you reinvest your RRSP refund in your RRSP and the rate of return on your RRSP and your debt over your life is the same, you end up with about the same amount in your RRSP whether you make RRSP contributions, pay down debt or use the refunds to pay down debt.