Investment 101

What's in your TFSA

Since 2009 Canadians have been allowed to put $5000 annually into their Tax-Free Savings Accounts. If you haven’t made a contribution, you can now put $20,000 into your TFSA, making it an increasingly important investment tool.

Still, despite the fact that TFSAs are becoming more powerful, according to two recent polls by leading financial institutions, 87% said they are using their TFSAs as a place to hold short-term savings, not a place to accumulate longer-term investments.

But if your bank is paying you 1% annually on a GIC in your TFSA, it would take 70 years to double your money and  at 2% it would take 35 years to double up.

If you would like to hold potentially more rewarding investments in your TFSA, you should talk to your financial advisor about alternatives. "If time is on your side and the goal is to save for the long term, savings accounts and deposits might not be the most suitable investments for your TFSA," says Wilmot George, Director, Tax and Estate Planning with Mackenzie Financial. "While these limit downside risk, the potential for strong tax-free growth is also limited"

Here are four reasons to consider investing in a TFSA:

	Any investment return (capital gains, interest and dividends) earned in a TFSA is never taxed, not even when withdrawn.
	TFSA money can be used for any purpose you wish - from down payments on a home to vacations or financing your child's college education.
	Unused contribution room can be carried forward to future years. And any amount withdrawn from a TFSA can be re-contributed in a future year without requiring new contribution room.
	Making a TFSA withdrawal won't affect your eligibility for the federal tax credits or income-tested benefits, such as the Canada Child Tax Benefit, Old Age Security or the Guaranteed Income Supplement.