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4 reasons to get a TFSA

June 15,2020

Author: Martha Harbell

A Tax Free Savings Account (TFSA) is great option for a wide range of savings goals - not just long-term investments and retirement. If you’re a Canadian aged 18 or older you can open a TFSA and make contributions, even if you haven’t earned any income yet.

Here are four reasons why a TFSA could be a great fit for your savings goals.

You want to create a custom, tax-sheltered investment

Any investments in a TFSA are tax-sheltered. This means that you don’t pay taxes on interest, dividends, or capital gains from your investments. You can also build a TFSA that fits your investment style with a wide range of options, like:

  • Guaranteed Investment Certificates (GICs)
  • Mutual funds
  • Exchange Traded Funds (ETFs)
  • Savings accounts
  • Stocks
  • Bonds

You want a flexible savings plan

TFSAs can be more flexible than other investments.

You can withdraw as much as you want, any time, without paying tax on it. There may be some exceptions, depending on the types of investments you hold in your TFSA.

Overall, though, a TFSA gives you easier access to your money, which makes it perfect for saving up for short-term goals or creating an emergency savings fund.

You can also carry forward any unused contribution room, and when you make a withdrawal you can re-contribute that amount the following year. That way, you don’t have to worry about losing the opportunity to add to your tax-free savings.

You want additional income during parental leave

Worried about covering your expenses during parental leave? A TFSA can help. You can make withdrawals from your TFSA, tax-free, to supplement your income. Worry less about money and spend more time with your little one! You can always re-contribute later, when you start working again.

You hit the maximum on your RRSP contribution

Why miss out on tax-sheltered savings just because you've already contributed to your RRSP? Use a TFSA to set aside money and potentially earn great interest on it. That way, you have savings that you can access earlier than retirement. Also, you could delay taking money out of your RRSP (which you would pay tax on) if you have a TFSA to draw income from when you retire.

Check out motusbank's TFSA options

More resources

How to choose the right investment for you
5 reasons to invest with GICs
How interest rates work and how they affect you

Mutual funds and other securities are offered through Aviso Wealth, a division of Aviso Financial Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise stated, mutual funds, other securities and cash balances are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer that insures deposits in credit unions. Mutual funds and other securities are not guaranteed, their values change frequently and past performance may not be repeated.