What you should know about TAX FREE SAVING ACCOUNT (TFSA)

I didn't know anything about TFSA until 2011, even though it has existed since 2009. How do I know about TFSA? Well, I received a letter from my bank promoting TFSA with a very interest-ing rate of 2.5% for a limited time. Since it was pretty interest-ting, I did some research on it and I eventually opened a TFSA account!

How it works?
Simple. Save up to $5000 every year tax free. Once withdraw, you won't be able to invest another sum of money until the next year. For example: you invest $4000 in first year, took out $2000 for vacation in the same year, leaving $2000 in the account. Advise: Do not do anything else until the anniversary year. On the second year, you can deposit up to $10000 max in the account. With $2000 in the account from previous year, you can put in another $8000 to make it up to $10000. Understand?

Since this program was initiated in 2009, and you decided that you would give it a try. You can certainly save up to $15000. Remember: The maximum amount you can invest is $5000 per year. $10000 for two years. $15000 for three years. And you shall do the rest of the calculation. The Catch? Take note if you bank would charge you for withdraw money and how much. Personally, I had chosen PC Financial again because of their no fees policy.

TFSA aka Tax Free Saving Account implies that you won't have to pay taxes for the interests you earn in your account. It really doesn't matter if you don't have too much money saved in the bank. But hey, if you have tons of money saved in the bank, that would make quite a difference. Most TFSA offers a better interest rate that regular saving accounts which is a bonus. The differences between TFSA and regular saving accounts? I would say a better interest rate and not taxable interest income. So after weighting the pros and cons, I eventually think it would be beneficial to open one up to test. It doesn't hurt me in any ways.

A lot of people also debate the differences between RRSP and TFSA, which one is better etc. For me as a student, I think TFSA would be more realistic. Reminder, I am a student, I am not ready to save up money for RRSP! I am saving because I will have to buy a house, a car, vacation etc. Not saying that RRSP is not worth investing, but that would cross my mind when I am 20 close to retirement? And I am now too young for that TEEHEE!

TAKE ADVANTAGE OF TFSA! Visit  http://www.tfsa.gc.ca/ for more detailed information. By the way, I think TFSA is only eligible in Canada. Oops.

TILL THEN!