Tax-Free Savings Account (TFSA)
The golden child of Canadian personal finance.
The Limit
Always check your CRA My Account for your exact personal limit. Over-contributing attracts penalties!
Quick Room Check
Check your CRA My Account for the exact total.
The Tax Vibe
Post-Tax money goes in. Tax-Free money comes out.
Best Used For...
- Short-term savings (vacation, car)
- Long-term investing (stocks, ETFs)
- Everyone over 18
Description
Despite the name 'Savings Account', this is best used for investments. You pay no tax on interest, dividends, or capital gains. None. Zero. It is the most powerful tool for building wealth in Canada.
Contribution Room 101
- You get new room every year (currently indexed to inflation).
- If you don't use it, you don't lose it. It carries forward forever.
- You start accumulating room from the year you turn 18, provided you are a resident of Canada.
The Golden Rule of Withdrawals
When you withdraw money from a TFSA, that contribution room is NOT lost. It is added back to your limit on January 1st of the FOLLOWING year. This makes the TFSA incredibly flexible for short-term goals.
Investment Eligibility
You can hold almost anything: Cash, GICs, Bonds, Stocks, ETFs, and Mutual Funds. Don't just leave it in cash!