Each year I am asked about investing into a TFSA. Lets look at the pros and cons.

The TFSA is sheltered from taxes. It is a good short term investment that holds after tax dollars. There is not a tax deduction as with the RRSP. Do note that the investment grows and when taken out you do not pay tax on it. If you are 18 and older you can open a TFSA. This is a great venue for those that have filled the room in their RRSP. The TFSA as of 2020 allows for $6,000.00 investment. Keep in mind the money you invest is after tax dollars. It is a very good venue for supplementing an income during critical times like parental leave. It allows for an easier access to your money, most times you can have your money within 72 hours of requesting it. Keep in mind there may very well be fees attached to taking the funds out of the TSFA. A financial advisor would explain the fees structure attached to the investment.

The fee diminishes the longer one has the investment. You can carry forward room in the investment. Should you remove funds you may reinvest going forward to top up the remaining room. The TFSA take into account your risk tolerance. The funds are invested accordingly. The investment may occur regardless whether you have earned an income. Each person has a very specific financial need and goal. Spending time with a financial advisor is well worth the effort.

I discuss with my clients their respective portfolios several times a year. Life and needs change. A TFSA is a very flexible savings plan. We live in a time where few companies offer a pension plan. The TFSA and an RRSP are so very important to start early to ensure maximum growth. I am reminded of the rule of 72. Take the investment % return and divide it by 72. For instance, if your return is 2% divided by 72 is 36. It will take 36 years for the investment to double. Ask yourself what your investments are returning. Is your money working for you as hard as you worked for it?

 

Have an amazing 2020, be safe, invest in your future.

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