New to Investing Series Part II: TFSAs

Tax-Free Savings Accounts (TFSA) allow individuals to save and invest money without paying taxes on the growth. Who doesn't love avoiding taxes? It's like finding a loophole in the system. Just make sure you don't contribute more than the annual limit, or else the taxman might come knocking.

TFSA's can contain a variety of investments such as stocks, bonds, mutual funds, ETFs, and even cash. The best part is that any income earned within the account, whether it's from dividends, capital gains, or interest, remains tax-free. So you can watch your money grow while the government watches helplessly. 

Should you contribute to a TFSA or a RRSP? They both have their pros and cons. The pros of a TFSA include the liquidity and the lifetime contribution limit. You can take your money out with no tax implications. You can also put money back in up to the lifetime contribution limit. The main downside of a TFSA is there is no tax deduction like with RRSP’s. This may not matter as much to you if you have a low marginal tax rate (MTR). 

If you turned 18 before the year 2009 and have never contributed, your maximum lifetime TFSA contribution limit is now over $100,000 and growing each year. This number can be found on your CRA Account for Individuals. 

TFSA’s are a great way to earn good returns on your savings, while maintaining a high degree of liquidity. This is an ideal account for your Emergency Fund, which is ideally three-six months worth of expenses. 

If you need guidance on choosing the types of investments within a TFSA, Tara Webber of BeOne Financial can help you. Contact us today!