Yes, opening a Tax Free Savings Account or TFSA surely seems to be a good idea. In fact, TFSA is good for a person who is 18 years or above and is looking for long term investment.
What is Financial Planning?
A financial plan is where you put forth a budgeting, savings and investment plan to achieve your future goals. The goal could be a leisure trip, or retirement savings, educational plan or kids’ savings plan.
Tax planning is a part of financial planning, where you meticulously plan to save on your tax liability legitimately, so that you can use those funds for an alternative expenditure or savings.
So, coming to the point, TFSA is a tax-free savings account and an eye candy for those who are looking to save on taxes.
Let’s explore if it is a good idea for you to open a TFSA.
Comparison of TFSA, non-registered account RESP and RRSP
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TFSA is generally suitable for all kinds of investors be it youth, or an employee, middle aged person, pre-retiree or a retiree.
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RESP generally reaps better than RESP due to the grant it receives. However, it should be noted that a TFSA is not taxed on withdrawal, but an RESP is taxed in the hands of the beneficiary.
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RRSP is better is better then a TFSA in terms of contributions limit
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A non-registered account has no limits, terms and conditions, it offers the best flexibility, whereas a non-registered account is fully taxable.
Is TFSA Canada a good idea?
The suitability of TFSA depends on various factors such as your age, savings plan, contribution amount you are looking for and your investment time frame. Further, your investment objective, tax planning and the kind of flexibility you are seeking also determine your financial decisions.
A TFSA is good for a person who Is above age 18 and who wants to invest long term an amount that is lower than $6,000 per annum and is not seeking any government grants or contribution flexibility.