Confession: I have never maxed out my RRSP

I've been writing about personal finance for more than a dozen years now. And when I talk about my own financial habits, I've been candid — but there's one thing I've never admitted.

Until now.

I have more than $50,000 in unused RRSP contribution room.

In fact, I have never contributed the full amount I'm allowed to contribute to my registered retirement savings plan, not in any year since I started a plan for myself at 22.

While some of my fellow money mavens will gasp at this as a horrific misstep, I don't feel remotely guilty. Here's why:

1. Eighteen percent of my earned income may not be a lot of money to Donald Trump, but it's a lot of money to me. As working Canadians, we are each allowed to put 18% of our earned income each year into a registered retirement savings plan, where our money can grow tax-free until we retire. When you put money into an RRSP, you get an immediate tax deduction, and your money grows tax-free inside your RRSP until you withdraw it to live on during your far-off retirement.

If you earn $50,000 a year, that means you can put up to $9,000 into an RRSP (up to a maximum of $22,970 for the 2012 tax year, and less any money you've put into the retirement plan at your workplace; the contribution deadline is March 1). That's a pretty good chunk of change! Don't get me wrong: I absolutely believe in contributing to an RRSP every year, for the tax savings alone. But parenting is expensive business, and most of us have more pressing uses for at least $5,000 of that $9,000. Why get into debt — and pay interest — when you could pay for those expenses with your own money?

2. Retirement is still a long way away, but my kids (and my mortgage) are right here. Yes, yes, of course, the earlier you start saving, the more effortlessly you'll build retirement savings. It's all because of the power of compounding. And that's exactly my point. Even if you earn only 3% interest, saving $1,000 a year for 40 years will swell to nearly $78,000. Don't have $9,000 to put into your RRSP? Contribute what you can, and know that time is on your side.

3. Other kinds of savings are even more important to your family. Taking care of your family is job one, and unless you're already set up with life and disability insurance, in my opinion a parent's got no business maxing out his or her RRSP. In addition, a recent Globe and Mail article notes that many Canadians are dipping into their retirement savings, triggering tax penalties and losing that all-important time to compound, because they have to pay for an unexpected illness or disability. You may have a little bit of disability insurance through your employer, but most of us aren't even close to being financially prepared for an unexpected illness. Would I rather put some money into an emergency fund, to ensure my family can stay afloat if one of us gets seriously sick, than max out my RRSP? You bet I would.