TFSA - Tax-Free Savings Account Comes Into Focus

When Finance Minister David Flaherty announced the creation of a new consumer tax-free vehicle, many people wondered if this would be an initiative to replace RRSP investment or augment it. Let's re-visit David Flaherty's TFSA (Tax-Free Savings Account) announcement from earlier this year.

It seems pretty clear that the TFSA is not an RRSP replacement, but rather another tax-free vehicle you can utilize to save money in both the short and long-term. Perhaps that is the biggest differentiating factor between the TFSA and the RRSP, in that the RRSP is exclusively tailored for retirement savings, whereas the TFSA can be used as more of a hybrid investment option.

On another note, I found it interesting to learn that people in British Columbia (44%) are more likely to open a TFSA account than any other province across Canada according to a recent study conducted by Fidelity Investments. In contrast, Ontario came in at 36%, Quebec at 35%, Prairie Provinces at 30% and the Atlantic Provinces are least likely to take advantage of the TFSA at a paltry 24%.

What many people will be pleased about is that the TFSA can hold virtually the same type of investments as their RRSPs. So investments like cash, GICs, bonds and public equities are all fair game for the Tax-Free Savings Account.

If your financial representative has not talked to you about the TFSA yet, it's probably a good idea to bring it up at your next meeting because it just may be the missing piece to your savings puzzle.

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[ READER COMMENTS ]

1

said:

The TFSA is all over Canada? Or in some provinces. Is it mandatory to have a beneficiary for the TFSA? Your answer is appreciated.

Posted at 10:08 PM, on January 11 2009

TFSA - Tax-Free Savings Account Comes Into Focus

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