Take advantage of your TFSA

A recently released survey shows that 47% of Canadians have opened a Tax Free Savings Account (TFSA.) Out of that 47%, only half stated they have made a contribution to their account this year. Evidence from other surveys conducted over the past few years suggests that the reason for the lack of participation stems from many Canadians not understanding exactly how a tax free savings account works.

TFSAs were introduced in 2009 by the Government of Canada. Savings in the account can be invested multiple ways, from mutual funds to Guaranteed Investment Certificates (GICs.) The account allows contributions up to $5,000 per calendar year. Any unused contribution room carries over to the following year. For example, if you only contribute $2,000 this year, you will be able to contribute the remaining $3,000 next year, in addition to the regular $5,000. This rule also applies if you require access to your savings. Any funds withdrawn during the calendar year are re-payable in the next calendar year. These are important rules to take into consideration, as those who over-contribute are subject to tax penalties.

Another reason Canadians are not taking advantage of TFSAs is believed to be they simply don't have a savings plan. From saving for a family vacation, to building a larger down payment when you apply for a mortgage, the possibilities are truly endless.

Click here for more information on TFSAs.