A Tax-Free Savings Account (TFSA); this type of account has The Budget Babes feeling like she’s on top of the world.
- Any income that you make from investments within this account is tax-free (hence the name). This means that you don’t have to claim any income you’ve made from your investments on your tax return at the end of the year. I’m talking about “free” money here people.
- You can contribute from the age of 18 to infinity and beyond. As of January 1, 2017 you can contribute up to $52,000. Check out our TFSA infographic for additional information.
- You don’t need to have a job to open an account. If grandma gives you $50 as a gift, go and put that $50 into a TFSA and invest it. Just watch that baby grow!
What the TFSA is not:
- It’s not a type of investment (contrary to some peoples’ belief). It is a registered savings account. Don’t just put money into your account and have it sitting there. The whole point is to have your money working for you by investing it in either stocks, bonds, mutual funds, etc.
- It’s not an everyday bank account. Although you can deposit and withdraw into your account when you want, there are some rules surrounding this so make sure you understand them. When I first started investing within her TFSA, I made the mistake of not understanding the rules. Unfortunately, I was taxed by the Canadian Revenue Agency and had to pay a big chunk of money. I don’t want this happening to you.
There’s a ton more information surrounding the TFSA which I describe in more detail here.
If you’ve already opened a TFSA and have investments sitting within your account, you’re doing good things. If you haven’t yet, get out there and open one up today. You’ll be happy you did. I’ve had a TFSA since the age of 18 and now have full control over the investments in it (thanks for teaching me momma and poppa bear). If you’re still confused on how to set one up, or if you want to learn how to manage your own account, you can always contact me to help you. You can think of me as a personal trainer for your bank account.