TFSA Accounts: You need one

Everyone needs a TFSA!

A Tax-Free Savings Account is a type of savings account that was introduced by the Canadian federal minister of finance in 2008, the amount of people saving in Canada has been a record low while debts are record high. It exists to encourage Canadians to save more money with the incentive of avoiding taxation. Each person is eligible to deposit (or contribute) $5,500 a year tax-free. If you contribute more, you will be taxed. Any unused room, you can carry forward to the next year. For example, if in 2015 you contributed $3000, then in 2016 you will be allowed to contribute $5,500+($2500 left over from 2015)= $8000. Your contribution room begins at the age of 18 or starting the year of 2009. If we start counting on the year of 2009 the total contribution room will be $36,000. Always check Canada Revenue Agency http://www.cra-arc.gc.ca/myaccount/ to see how much you are allowed to contribution.

If you withdraw money, the extra contribution room will not count until the next year. 
For example:
In 2015, I contributed $5,000
In 2015, I withdrew $1000
** Remember: The maximum is $5,500 - ($5000 total contributed this year)= $500 left for year 2015. Even though I took out $1000, my contribution room will only allow for $500. The extra room will count towards year 2016. Again, go to the website above to check your allowable contribution room. If your contribution room is $20,000, then you have more room to adjust your account.


Other things to know about TFSAs

• The money you earn within this account is not taxed 
• This account is not protected from creditors during bankruptcy or legal financial judgement
• Anyone the age 18 or over can open an account
• You can withdraw money whenever you like
• This money will not count as income for government pensions, which means the government won't tax you if you take money out of this account during retirement