The Tax Free Savings Account (TFSA) has been around for a few years now. A TFSA can be used for virtually any type of savings goal. So, what are you saving for in your TFSA?
When TFSAs were first introduced in 2009, my husband and I each opened one up immediately. We had very little knowledge of how we could use them, but we were attracted by the feature of not having to pay income tax on any interest we earned on the accounts.
Consider investing – As time progressed and we learned more about the TFSA, we bought some investments within our TFSAs, as we realized that we could save for longer term goals within these accounts, too, not just short term ones.
Open more than one – We also discovered that we could open up more than one – by doing so we could save for different savings goals in different TFSAs, eliminating confusion.
The result? I now have multiple TFSAs with specific savings goals in mind. I am not paying tax on any gains made in these accounts and as long as I keep track of how much I contributed into each, I don’t have to worry about over-contributing and paying any penalties.
A perk for married couples – if you contributed the maximum into yours and your spouse still has some room in his/her TFSA, then you can use your money to contribute to your spouse’s TFSA in order to benefit fully from the tax free savings that the TFSA has to offer your family.
Note to parents – Some parents I know even use the TFSA to save for their children – not always for education because they can use Registered Education Savings Plans for that, but to save for other things like helping them with a down payment on their home, helping them pay for part of their wedding, etc.