Family with young kids gathered around laptop, tax free savings

Tax Free Savings Accounts reduce your taxes, and help you invest.

Having emergency reserve investments outside of your RRSP is important. With the new government Tax Free Savings Account (TFSA), your money can grow tax-free till you need it. A rainy-day fund is an important part of any financial plan, learn how you can make yours grow using one of the most flexible saving options available.

For most Canadians, saving into a Tax-Free Savings Account is the best place to start to build an emergency reserve, or save for something you have been dreaming of. Previously any money you saved outside your Registered Plans could be subject to taxes on the growth, with the creation of the TFSA that savings can now grow tax-free allowing you to build your emergency reserve or save for something you have been dreaming of that much faster.

TFSAs vs RRSPs

  • RRSPS
    • Tax deduction on any contributions reducing your income tax
    • Tax-free growth
    • Fully taxable when you withdraw
  • TFSAs
    • No tax deduction on contributions
    • Tax-free growth
    • Tax free when you withdraw the money

Your RRSP is a great place to save to reduce your income tax, but that money is then 100% taxable when you want to withdraw it (with a few exceptions).  The Tax-Free Savings Account does not give you the income tax dedication RRSPs provide; however, the money is still able to grow tax-free and be withdrawn tax-free as well. This make the TFSA a great place to invest, for money that you need to access while you are still working, or to provide tax free money in retirement.

Contact AAM Financial today to get expert advice on which investment vehicle is right for you and your family, and how tax planning can make a significant impact on your overall financial plan.

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