Decide how you'll be investing and what kind of investment account you'll need...
what investments work best in a tfsa?
How you'll invest your TFSA money will depend on 3 things:
1. What you are saving for and when you'll need the money
2. Your risk appetite
3. How much investing work you want to do yourself.
You can learn about these things in the Saving & Investing section so that you can decide what kind of TFSA account you'll need.
When you're starting out and only have a TFSA account, from the tax benefit perspective all kinds of investments will work well in the TFSA.
- You can buy a GIC if you expect to use the money in a few years.
- You can open an investment account and buy both equities and fixed income in amounts that correspond to your asset mix.
Even a savings account with a competitive interest rate may do the job if you think you'll need the money on demand.
If you also have an RRSP account, and perhaps even a taxable account, consider reading the RRSP section where we talk about what investments work best when you have all three types of accounts.
what's next?
tfsa - tax-free
savings account
pay back debt OR CONTRIBUTE TO tfsa?
If you have the flexibility to delay debt repayment, think whether it makes sense to pay down your debt as soon as possible or pay some of it while you put some money into a registered account.
- Save first if you expect that the rate of return in the registered account will be higher than the interest rate on your debt.
- This is because paying down debt is like guaranteed after-tax savings (you know exactly the interest rate you’re paying), while the return on your investment is not certain (even the interest rate on your savings account will likely change in the future).
Just in case, learn what it takes to close a registered account...
Once you've opened an account...
Once you've decided what kind of investment account you'll need...
Start saving and investing with the TFSA account as soon as possible.
You are eligible at 18/19 (age of majority).
how it works
Start by opening a TSFA account when you turn 18/19.
- Every year, you can put money into a TFSA account up to the current contribution limit (right now, it's $6,000). This is after-tax money.
- There is no income tax on whatever investment income you'll earn.
- You can withdraw the money any time without losing the tax shelter.
If you're older than 18/19 and haven't started yet, don't worry - start now.
- Your TSFA contribution limit (maximum amount you are allowed to save in the TFSA program per year) started accumulating in the year you turned 18 and you can catch up as soon as you've saved some money.
Any savings / investment account can be opened as a TFSA - it's your choice how you want to invest.
Own your TFSA, step-by-step.