Many of us set New Year’s resolutions for ourselves and often those resolutions have to do with finances. January is the month we say, “Ok, this year I am going to save more and spend less”. This article won’t tell you how to spend less, but it will outline two government sponsored programs available to help you save for retirement or even just a rainy day! Of course these are not the only vehicles you can accumulate money with – those include anything from putting dollars under the mattress to the most sophisticated tax shelter schemes – but these two are the most popular.
Tax Free Savings Accounts (TFSA)
This is the new kid on the block established by the government as of January 1, 2009. Canadian residents age 18 or older could contribute up to $5,000 into a TFSA. The funds would grow tax free and although there is no tax deduction for the contribution, withdrawals can be made at any time without paying tax. Also, there is no earned income requirement for an individual to contribute. For those years where no contribution is made, it can be made in later years. Any withdrawals can be paid back in addition to current contributions. Be careful not to do this in the same year as the money was withdrawn so as to avoid a tax penalty for over payment. Read more