At the start of this year, we Canadians have a new weapon in the fight against poverty or something.
The Tax Free Savings Account or TFSA is an account that provides tax benefits for saving in Canada. Contributions to a TFSA account are not deductible for income tax purposes but investment income, including capital gains, earned in a TFSA are not taxed, even when withdrawn.
The TFSA works like the opposite of a Registered Retirement Savings Plan (RRSP). After-tax income of up to $5,000 per year can be placed into a TFSA.[11] This money can then be withdrawn at any point of time, without penalty. Unlike RRSP’s, which must be withdrawn after the holder turns 71, the TFSA does not expire.
From Wikipedia (http://en.wikipedia.org/wiki/Tax_Free_Savings_Account)
This isn’t something you should maybe think about doing. This is something that you should take advantage of, period. This is an absolute no-brainer.
Here’s the official government page: http://www.tfsa.gc.ca/ which links to A helpful Howto.
I’ve gotten the RBC brochure and talked about it quickly with an agent. Aside from that, I haven’t really done much research. I’ll probably just stick to a high interest savings account at first.
ING offered one starting back in either November or December of last year (they paid double the interest on any balance to cover the taxes you would have had to pay). I don’t have anywhere near the amount in saving that I need to worry about paying taxes on it, but I opened an account anyway and ended up making a few bucks extra because of their “double interest”. Right now I’m just using it as a regular savings account, but eventually when I’m making more money it will be a very good thing to have.