5 Ways to Incorporate Unexpected Cash in Your Financial Plan

Receiving an unexpected sum of money can be a welcome surprise, but deciding what to do with it can be a challenge. Should you save the money or pay down debt? Invest the funds or donate to charity?

While rushing to book a vacation with proceeds from a windfall may be tempting, it might be more rewarding to use the funds to shore up your finances for the long run. Here are five strategies to consider:

  1. Grow your emergency fund

A robust emergency fund provides security for financial emergencies. Even if you feel confident about your emergency savings, padding your fund with some of your windfall money can further prepare you for financial curveballs, especially in an uncertain economy.

  1. Save for retirement

Investing a windfall into a tax-advantaged retirement account can significantly boost the growth of those funds over the years. That said, you’ll need to keep in mind contribution limits. For 2024, the contribution limit for a TFSA is $7,500, while the RRSP limit is typically 18% of your earned income from the previous year, up to a maximum of $31,500.1

  1. Invest for the future 

If you’ve maxed out your tax-advantaged investment options, investing through a taxable brokerage account may be the next best way to turn a lump sum of cash into long-term wealth. A financial planner can help determine how to invest to complement your tax-deferred portfolio to help you achieve long-term financial goals. 

  1. Prepay your mortgage

A windfall can make a big impact on your mortgage, depending on how much you owe. If you are considering this choice, be sure to ask your lender to put the windfall toward paying down your loan principal, which will reduce your interest payments in the long term. 

Before prepaying debt, consider opportunity cost, the idea that money used for one purpose can’t be used for another. Paying down debt could make the most sense if interest payments on the debt are higher than expected returns from your investment portfolio, for example. 

  1. Donate to charity

Contributing to charities that align with your values is not only a meaningful act of generosity but also provides a financial benefit in Canada through tax credits. When you make eligible donations to registered charities, you can claim a charitable tax credit on your income tax return, which helps to reduce the amount of tax you owe.

In Canada, you can claim donations up to 75% of your net income for the year. If you donate to certified cultural properties or ecologically sensitive land, you might be eligible to claim up to 100% of your net income.2

Choosing the best option for you

The best use of a windfall depends on your individual circumstances. If you’ve already maxed out your retirement accounts, paying down your mortgages or donating to charity to reduce taxable income may be a better fit. You can also split a windfall among several options to maximize your advantages. Additionally, before spending any of your windfall, you’ll need to determine if you owe taxes. 

Determining the best use of a windfall can be challenging, especially if you feel pulled in multiple directions. Work with your financial advisor to determine the best course of action as part of a long-term wealth management plan.


1 Canada Revenue Agency. Government of Canada, 4 Dec. 2024, www.canada.ca/en/revenue-agency/services/tax/registered-plans-administrators/pspa/mp-rrsp-dpsp-tfsa-limits-ympe.html. Accessed 16 Apr. 2024.

2 Canada Revenue Agency. “How Do I Calculate My Charitable Tax Credits?” Government of Canada, 27 Jan. 2016, www.canada.ca/en/revenue-agency/services/charities-giving/giving-charity-information-donors/claiming-charitable-tax-credits/calculate-charitable-tax-credits.html. Accessed 16 Apr. 2024.