Why You Should Open A TFSA Right NOW

I’m betting that most non-financial minded Canadians are still not aware of a great new option that the Canadian government has now made available to Canadians. The Tax Free Savings Account or TFSA is something that every Canadian 18 and older should open, the sooner the better.

The TFSA, similar to the American ROTH, allows you to save up to $5,000 per year of after-tax money (ie- your regular money), which will grow TAX FREE. That’s right, whatever you put that money into, be it a savings account, GICs, mutual funds, whatever, the interest you gain or the growth in your investments is not taxed. And you can withdraw it tax free. Wow!

Even if you aren’t big on investing at this point in your life, you can use the TFSA for small savings goals like a new car or the down payment for a house. Then, the money you withdraw from the account, is added to your room for next year. So anyone, who is saving for ANY purpose, needs a TFSA.

But what if you’re still in school, unemployed or just not really focused on savings right now? It doesn’t matter, you should open this account ASAP at your local bank, so that when you are ready to use it, it will have been building room over the years it was unused. So, if you end up using it 5 years from now, if you open it now it will have 5 times $5000 or $25,000 of room, but if you only opened it when you needed it- 5 years in the future, it would only have $5,000 of room. So, as you can see, regardless of whether you are going to use it or not, you should at the very minimum, get down to your local Credit Union or bank and open a TFSA right now. So it will have lots of room when you’re ready.

I opened mine recently and for now I’m using it for one of my shorter term savings goals. So I opened it as a savings account at my Credit Union. I walked in, signed a paper, had money transferred from one of my regular savings accounts into it, and bingo, I was done within a few minutes. I can now see the balance of my new account via my online banking page. It’s so simple, there’s no excuse.

Note that the $5000 of room you are given each year will be indexed to inflation- meaning 5 years from now, it will actually be a larger amount. But, you get my drift.

Sources / Learn More: