Saving for the future is important for a few reasons. The first is the obvious one, that is that the future is uncertain. However, the future is also a number of years away, so it is important to think about the future a little bit. Even if saving for the future doesn’t seem important now, it will be later when you’re older. The second reason that saving for the future is important is that it can help you avoid financial problems in the future. If you don’t start saving for your future now, then you’ll have to rely on a financial planner or someone else for advice.
There are many different things you can save for. Saving for an emergency fund should be at the top of your list. An emergency fund is a savings account that you can use to help you in the unfortunate event that you are caught without money. You can also save for your retirement, a vacation, or a new car. Saving for the future is important, because you don’t want to be in debt when you are older.
What is a TFSA or Tax-Free Savings Account?
A tax-free savings account is basically a personal investment account that allows you to earn interest, but not pay federal taxes on those earnings. The interest is not taxed until you withdraw the funds, and there is no minimum amount that must be saved to start a TFSA.
If you contribute to a TFSA, then the funds are not taxed until they are withdrawn. One of the biggest benefits of a TFSA is that it can be opened with a small amount of money. If you do not have much money saved up, you can open a TFSA with a $5,000 contribution and still reap the benefits.
Importance of Tax-Free Savings Account to Canadians
TFSAs work well for investors who are in a low income bracket and who are hoping to save up money to make a large purchase. TFSAs offer a tax incentive that can make a substantial difference in your finances. Your money can grow tax-free and you can use it at any time, unlike what you can do with a regular investment account or a bank account. You can buy a home, invest in stocks, pay for your children’s education, or just let it sit. It’s up to you.
Furthermore, Canadians can put money in a Tax-Free Savings Account and use it to save money or make investments. In order to qualify for a Tax-Free Savings Account, you need to be a Canadian resident and be at least 18 years old.
Why contributing to a TSFA is a good resolution and investment?
Traditional savings accounts have had a bad reputation for a long time. They have been blamed for the financial crisis and for being mainly used as a liquid asset rather than a long-term investment. Today, TSFA have a totally new perspective and are being recommended more and more as safe places to invest. In this blog, we will take a look at why a TSFA is recommended and some of the factors that make a TSFA an investment worth putting your money in!
- Tax-Free Savings Account has a tax-free compounding
If you have a Tax-Free Savings Account, you won’t pay taxes on the interest you earn on the account. This is because the interest is not considered a taxable income. This is a huge benefit that many people are unaware of and is perfect for those who wants to save money for their retirement.
- Tax-Free Savings Account has no complications in withdrawals
Tax-Free Savings Accounts have been introduced to help the average Canadian have access to a simple and tax-free savings account. It operates in a similar way to a traditional savings account, but it is not taxed. The account allows for withdrawals at any time you prefer unlike other investments in Canada such as GST Credit, Employment Insurance, and Old Age Security.
- Tax-Free Savings Account provides contribution room for spouse
Tax-Free Savings Accounts (TFSAs) are a great way to save money. They provide greater contributions room than regular savings accounts and offer tax breaks on savings, giving Canadians a great way to save for their retirement. However, there is one thing that makes this investment stand out and that is the spouse’s contributions. If you are married, you can contribute to your spouse’s TFSA and are also entitled to be treated as the contributor for the purposes of contributing.
- Tax-Free Savings Account has No Mandatory Withdrawals
Withdrawals from Tax-Free Savings Accounts are not mandatory, so there is no need to withdraw funds to avoid unwanted taxes. If a Tax-Free Savings Account holder decides to withdraw funds, they may be taxed on the amount withdrawn, but not on the interest or dividends earned on the account.
- Tax-Free Savings Account has No Tax Upon Death of the account holder
A Tax-Free Savings Account (TFSA) is a Canadian savings account that allows you, as the account holder, to earn tax-free investment income and withdrawals when you are 18 years old. What is unique about the TFSA is that, unlike other investment accounts, there is no tax upon death of the account holder. This allows for better planning and the ability to leave a legacy to future generations.
TFSA vs. RRSP
A Tax-Free Savings Account (TFSA) is a type of investment account offered by the Government of Canada that allows individuals to save for retirement without incurring income taxation. A Retirement Savings Plan (RRSP), on the other hand, is a Canadian registered retirement savings plan. It is a savings plan created by an individual or company that is registered with the Canada Revenue Agency and is used to save money for retirement.
If you are having a hard time choosing between the two, it’s better to use them both and reap the benefits of each. But those in a low tax bracket should prioritize investing in TFSA.
Best TFSA Savings Account Rates in Canada
As more Canadians are saving more for retirement, more account providers are getting into the market. With a large number of providers offering TFSA savings accounts, it can be difficult to find the right account. To help you out, here is a list of the best TFSA savings account rates in Canada for this year.
- EQ Bank Tax-Free Savings Account
EQ Bank Tax-Free Savings Account is one of the best Tax-Free Savings Accounts in Canada. It is a bank account that has 3% interest, a low minimum opening balance, and it is available across Canada. This account makes it easy for individuals to save and invest. There are also no minimum balance or withdrawals, and it’s backed up by CDIC.
- Tangerine Tax-Free Savings Account
Tangerine Tax-Free Savings Account offers a high interest rate and is one of the best in the market. It is the perfect account for those who want to save their money without having to pay taxes on their savings. The best part is that it has a high return on investment as it can go up to 3% in interest.
- CIBC TFSA Tax Advantage Savings Account
CIBC TFSA Tax Advantage Savings Account is one of the best TFSA options in Canada with no account fees, no minimum balance and no account closure fees. It also lets you contribute in only a minimum of $25. Making it the perfect TFSA for people within the low tax bracket.
The TFSA has been a beneficial asset for both young and old Canadians throughout its history and we are happy to see that it continues to be a great option for many people. We hope you enjoyed our article about why contributing to a TFSA is a good New Year’s resolution! If you haven’t taken the time yet to do so, there’s still time to get your account setup for the January 1st deadline.