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Definitions with Malcolm Morrison – TFSA (Tax Free Savings Account)

Listen to our podcast episode on this topic, “RRSPs and TFSAs – Which one is right for you?”

This is Definitions, I’m Malcolm Morrison. Free… free is an ambiguous word. But in this case free means… NO TAX! A Tax Free Savings Account is an account that the government lets you set up with your bank so your savings earn money without any taxation.

If you need to save – say for a vacation – a Tax Free Savings Account (TFSA) can allow you to do so without many restrictions. Although you have to be at least 18 years old, Canadian, and contributing within the set limit, there are no income requirements, you can withdraw from the account whenever you want. No questions asked. It allows you to have many types of investment options such as eligible stocks, bonds and mutual funds, meaning you still have control over how much or how little risk is involved.

Also, unused contributions carry forward. So, if you contribute $3000 in your first year but there’s still a $2500 gap left in your limit that you didn’t reach in your second year you can theoretically pay $8000 dollars now that an additional $5500 has been added to the pot.