A new piggy bank – How to make the most of your TFSA
Moneysense, Rob Gerlsbeck
The new Tax-Free Savings Accounts introduced by the federal government are a welcome piece of good news. But most of us are still trying to figure out how to make the best use of them.
Here are the basics: Anyone over 18 can invest up to $5,000 a year in a TFSA. You can put your money into a savings account, GIC, stocks, bonds or mutual funds. No, you don’t get a tax break for contributing money, as you do with an RRSP, but your money grows tax free inside the TFSA–and, unlike an RRSP, when you withdraw your money, you don’t pay a penny of tax. This can have very nice effects. If you contribute $200 a month to a TFSA for 20 years at an average annual return of 5.5%, you’ll amass $11,045 more than you would in a taxable account. That makes for one fat piggy bank.