14
 439

 TFSA

Can someone explain to me tax-free savings accounts? I know you aren't taxed on the money in there, but I'm wondering what should they be used for, etc?

I do have one, I have had it for a few years. I put $100 every two weeks into it. Last year, after having it for two years, I got a phone call from the bank asking if I would use that money soon, or if I would be interested in transferring that amount into some high-interest savings account which would make me more money in the long run. I said I wasn't interested because I was in fact pulling out that money in a few months for a trip to Europe.

I now have enough to cover half of our honeymoon, so I will take it out for that... and after that I will be saving up for another vacation. We have also sold a couple of vehicles and may be selling one more and I am thinking I will just put that money in my TFSA as well.

Now I see that some people use their TFSA as a long-term savings account, saving for retirement etc. That makes me think I'm using mine wrong! But if it's for long-term savings, why would I have gotten that phone call telling me to transfer if I wasn't going to use it soon?
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 11 Apr 2012 3:12 PM
 2 Aug 2009
Nuke
Addict
3,348
Well you're not being taxed on the interest you earn in the account. If you're earning 0% interest in your bank's savings account, there's really no point on the money being in a TFSA.
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 11 Apr 2012 3:57 PM
 27 Apr 2006
 Kitchener
Teacher_Wife
Raving Lunatic
10,046
We use our TFSA to hold our emergency fund. These are our investments. This way we can get at it quickly, but we're not taxed on it. It also makes us more likely to rebalance our investments as we can sell without paying capital gains (which I hate doing). If we never use it, it will be part of our retirement plan.
Basically if you're going to use it this month - don't do it (because withdrawal and deposit rules can be funny if you're doing too much in one calendar year).
I figure that if you're saving up for short term savings (over one year - like a trip), medium term savings (car, house, or reno), or long term (retirement), then it is a fine vehicle to use.
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 11 Apr 2012 4:05 PM
 28 Jun 2011
 Saskatoon, SK
LinzLDT
Rookie
119
Thanks! I have only used it for one trip so far... and we are hoping to also go to Australia in the next couple of years so it will go towards that as well. I just wasn't sure if it was meant to be used for long-term savings. Until we finish traveling and settle down with children, I planned to just use it for these big trips we want to take! After that, it may just be house renos and emergency fund. I guess I'm not really using it improperly then!

I don't really miss the money that goes in there - as soon as my car payments were done, I put that amount of money into my tfsa. I'm not used to having that money in the first place, so it's nice to see I can all of a sudden decide to go on vacation and not have to touch the money in my regular day-to-day account!

I'm still trying to convince my fiance to start using his. He opened it a few years ago but has not put in any funds yet.
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 11 Apr 2012 7:18 PM
 18 Jul 2006
Dazed
Postaholic
8,516
But at 0% interest, she's not gaining any contribution room (maybe $5 a year, maybe).

That's why I put my TFSAs in high interest savings accounts. Even at a measly 2% or whatever, it's still at least gaining something. I think most of this year's room (once I finish my catch-up) will go into TFSA-registered investments instead of a savings account. The previous room should more than cover me for an 8 month emergency fund so I think I can be a little riskier with the new stuff. This is how I hope to get that increased contribution room.

In other words, I use my TFSAs for 8 month emergency funds (something I consider mid-term) and then plan to use the new room for retirement or long-term savings.

I generally keep money that I use more frequently in regular savings accounts although technically I should move more of it into my TFSA until that's maxed out since I haven't been using it for those short-term things anyway. For example, I have some money set aside for three vacation-y things for the next few months. I'd bet anyone that I don't actually end up using this money to pay for it and instead just pay for it out of my regular paycheques instead. I kinda suck at spending money these days. This sounds like a good thing but it isn't really because it means I'm breaking promises to myself all the time, not having my money work as hard as possible for me, and not properly enjoying the money I'm earning. *sigh* Finances can be so emotional!
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 12 Apr 2012 8:11 AM
 28 Jul 2011
iseesquared
Addict
2,910
We're using our TFSA for retirement. We expect to be in a high income tax bracket so we want as much income as possible to come tax-free.

We keep our emergency fund separate.
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 12 Apr 2012 10:48 AM
 28 Jun 2011
 Saskatoon, SK
LinzLDT
Rookie
119
Right now I am gaining about $5 a month in interest, but I'm not sure what my rates are. I use a chequing account for my regular day to day stuff, and we have a joint savings just for our mortgage, because it had the lowest rates with the number of transactions we need to make per month (just transferring money in on each pay day, and the mortgage being taken out) So my TFSA is really all my savings for big purchases. I guess I was just wondering if I was using it correctly! It's not really long-term savings at the moment - my only long-term savings are my RRSPs.
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 12 Apr 2012 11:51 AM
 27 Feb 2008
Winerybride02
Devotee
1,452
I have my TFSA at ING. Then I've subdivided all the money into different accounts.

For example, I'm a contract worker so I have a 'buffer fund' for the summer.
Then I have 'emergency fund/retirement'
'Kitchen fund (renovations)'

That way I don't feel guilty for removing it because I'm not taking it out of one big pot. Since it's already labelled with the specific purpose, I'm finding it takes the emotion out of the dealing with finances.
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 12 Apr 2012 12:24 PM
 28 Jun 2011
 Saskatoon, SK
LinzLDT
Rookie
119
Is it subdivided within your TFSA? Like you have multiple accounts under your TFSA?

Mine is through CIBC, and my fiance's is through CIBC Wood Gundy. I think he gets better interest rates than I do, but I don't know for sure.
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 12 Apr 2012 3:54 PM
 6 Apr 2012
Goose
Rookie
232
Here is a summary of the various current TFSA rates:


People's Trust TFSA - 3.00% (No transfer fee)

CDF KeyReach Savings - 3.00% ($50 transfer fee)

Canadian Western Bank WestEarner TFSA Account - 3.00% (Min $50)

Manulife Bank Tax-Free Advantage Account - 2.25% (No transfer fee)

AcceleRate Financial "AcceleRate TFSA Savings" - 2.10% ($50 transfer fee)

Steinbach Credit Union TFSA Savings - 2.10% ($15 transfer fee)

CTFS TFSA - 2.00% ($50 transfer fee)

Hubert "Tickled Pink" TFSA - 2.00% (No transfer fee)

ICICI TFSA Savings Account - 2.00% ($25 transfer fee)

Achieva TFSA - 2.00% (No transfer fee)

Maxa Financial TFSA Savings - 2.00% ($75 transfer fee)

Outlook Financial TFSA High Interest Savings Account - 2.00% ($50 transfer fee)

Ally High Interest TFSA Savings - 1.80% (No transfer fee)

ING Tax-Free Investment Savings Account - 1.60% (No transfer fee)

State Bank of India (SBI) TFSA Power Saving Account - 1.50%

PCF Tax Free Interest Plus Savings Account - 1.50% ($50 transfer fee)

HSBC Advance/High Rate TFSA - 1.20% ($50 transfer fee)

BMO TFSA Savings Account - 1.15% (Min $50, No transfer fee)

CIBC TFSA Tax Advantage Savings Account- 1.15% (Min $25, $100 transfer fee)

Scotia Tax-Free Savings Account - 1.15% ($50 transfer fee)

RBC Registered Savings Deposit TFSA - 1.15% ($50 transfer fee)

TD High Interest TFSA Savings Account - 1.15% ($50 transfer fee)
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 12 Apr 2012 4:33 PM
 23 Jul 2008
deebo25
Rookie
156
I don't think there is a 'wrong' way to have a TFSA. I have three accounts, and this is what I do:

one of them is a mutual fund account that I make regular contributions to in addition to my RRSP. This money is not to be touched until retirement.

the 2nd one is locked in a GIC which we plan on using in the future for when we move into a bigger house

the 3rd has no specific purpose, kind of what you use yours for. I try to only keep the $5000 minimum balance in my chequeing acct and transfer any additional money over to this TFSA to get a little interest, even if it is just a few dollars each month. I might use this money to buy a new car or put it towards a new roof, or something like that.
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 12 Apr 2012 10:30 PM
 18 Jul 2006
Dazed
Postaholic
8,516
You don't need to have TFSAs in a savings account. You can have investments (like stocks, bonds, mutual funds), savings accounts, GICs, and I think you can have gold / other precious metals (but I think they have to be certificates in order to be registered into a TFSA---I could be completely off on these being eligible, though).

TFSA, like RRSP, is a box that can hold many, many different types of "money". Don't limit yourself to high interest savings accounts when you do your TFSA research. Choose the vehicle that is best for how you plan to use it.

That said, I can't imagine why anyone would keep it in a regular savings account, since they offer such low interest rates.
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 19 Apr 2012 11:53 AM
 25 Sep 2010
First_Wife
Fan
926
We moved my DH's TFSA into investments and it now earns between 5 and 8% interest.

To the OP, you should really move your TFSA into a higher interest product, whether it's with your bank or through an investment broker of some kind. There are lots of options out there that are high interest, but don't lock in your money and don't charge you to take it out at any time. I don't think your bank was trying to get you to cash out your TFSA, but rather to move your TFSA into a higher interest savings account.
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 20 Apr 2012 4:27 PM
 28 Jun 2011
 Saskatoon, SK
LinzLDT
Rookie
119
Yes they were just trying to get me to move it. I was planning to cash out anyway for a vacation so I decided not to move it at the time. I talked a little more about it with my fiance he looked into what he has... I guess his TFSA is in mutual funds and he does make quite a good return on his. I think that we may keep both. We can use his for longer term savings because he is making a bigger return, and we can use mine just to put money aside for purchases/trips/etc.
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 26 Apr 2012 7:24 PM
 13 Jun 2005
 Toronto, ON
aw2006
Addict
3,822
I have a TFSA account - in it I hold a GIC. We are using this rather than an RESP for our DD since we don't really like the rules around RESPs.

I got a pretty good rate at ING on a 90 day GIC, it was just before they lowered their rates.
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 31 Oct 2012 11:59 PM
 30 Apr 2012
 buzzle.ca
buzzle
New Member
0

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