SmartMoney: TFSA
Your first lesson comes in the form of an acronym—TFSA. Now pay attention and don’t you dare roll your eyes at me because those four little letters have huge implications for your future financial security.
Photo: Tim Andries
So what’s a T-F-S-A? It stands for Tax Free Savings Account and even as a student you should be taking advantage of this opportunity.
Introduced by the Canadian Minister of Finance, Jim Flaherty, this investment option for Canucks provides tax benefits for putting money into a savings account. Money put into a TFSA is not subject to income tax and can be withdrawn from at any time without then being subject to taxation. In financial terms, both your principal and your returns aren’t taxed. There is a $5,000 annual limit on TFSA’s but presently, an investor has contribution room from 2009 (when Flaherty initiated the program) and 2010, which means you could invest up to $15,000 right now, tax-free.
So what does a TFSA mean for you? It means a down payment on a house or security for when you really need money. There is a real advantage to having a TSFA as a long-term savings vehicle. Typically when we talk about savings, the capital gains tax is assumed, which means being taxed on every dime you make. But not with a TSFA. It is amazing that the government even opened this opportunity, and if you are looking only five years in the future—buying a home, buying a car, or needing emergency funds—this is the right option.
For more information visit tfsa.gc.ca
Jeremy Cockrill
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