TFSA

It has been described as a Swiss account for the average Canadian.

On January 1, tax-free savings accounts (TFSAs) were introduced to the Canadian public. Many bankers and financial planners consider these plans to be the most innovative savings programs since the creation of RRSPs back in 1957.

These plans help us acquire the full effect of the magic of compound interest because whatever we earn, we keep. We can choose to put our TFSA contributions into a wide range of investments, including savings accounts, GICs, mutual funds, and individual stocks and bonds. We can withdraw from the account at any time with no tax payable on the proceeds.

Since it is a government-sponsored plan, there are certain rules that must be followed.

• Anyone 18 or older can open a TFSA. There is no maximum age limit.

• At the present time, there is a $5,000 contribution limit, but many bank officers believe it will increase each year.

• Any unused portion of the $5,000 per year can be carried forward indefinitely, so we will never lose contribution room.