Today, I am pulling another set of letters from the financial alphabet soup.
TFSA -- Tax Free Savings Account
The Tax Free Savings Account allows Canadians to set money aside to grow tax-free, starting at age 18, if you have a Social Insurance Number and live in Canada.
The TFSA is a registered vehicle, and therefore monitored by Canada Revenue Agency. There is a contribution limit every year, but if it's growing tax free, it is in everyone's interest to use it. You will accumulate TFSA room every year since 2009, even if you don't use it.
Ideally, the TFSA should be used for medium-term or long-term savings. Unfortunately, the banks have hijacked this great idea and pushed it on the public without really teaching about the power of this vehicle. How many people out there have a TFSA at their bank and are simply using it as a savings account? Too many. Too many people put money in their TFSA at the bank and then take it out when they need it. This affects their contribution room and costs them fees. Did the banks explain this part of it? Most likely not. (We would have been better off if it had been called a "tax free savings PLAN".)
If you want more information about the real power of the TFSA, contact me.
Mary
mary.arif@gmail.com
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