Tax-Free Savings Accounts (TFSAs) are a great tool to save for both short-term and long-term goals.

Tax-Free Savings Accounts (TFSAs) Explained

A Tax-Free Savings Account (TFSA) is a savings account that is registered with the government and offers tax-free growth and tax-free withdrawals. In other words, you can save money in a TFSA and any growth (such as interest or capital gains) that your savings generate will not be taxed, and you won’t have to pay taxes when you withdraw the money either.

TFSAs were introduced in Canada in 2009 and have become a popular way for Canadians to save money for both short and long-term goals. The money in a TFSA can be used for any purpose, including saving for a down payment on a house, saving for retirement, or even as an emergency fund.

There is a limit to how much you can contribute to a TFSA each year, known as the TFSA contribution limit. The contribution limit changes each year and is based on inflation and average wage growth. The annual TFSA dollar limit for 2023 is $6,500. If you’re contributing in 2023 for the first time, you’re eligible to deposit $88,000 in total contributions, provided you’ve been over 18 years of age since 2009 and have a valid social insurance number. If you over-contribute, you’ll face a penalty tax.

It’s important to keep in mind that the investment options for a TFSA are similar to those for a traditional brokerage account. This means that you can hold a variety of investments, such as stocks, bonds, mutual funds, exchange-traded funds (ETFs), and guaranteed investment certificates (GICs), in a TFSA.

Overall, a TFSA can be a useful tool for saving and investing, especially because of the tax benefits. However, like any financial product, it’s important to understand the rules and regulations before opening an account, and to consider your individual financial goals and risk tolerance.

Please contact us if you’d like to learn more or open an account.