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Tax-Free Savings Account ideal as emergency backup fund

Globe and Mail Update

Withdrawals are tax-free, unlike RRSPs ...Read the full article

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  1. Born Yesterday from Canada writes: Why didn't the government simply allow tax exemptions on the interest income for $5000 in 2009, $10K in 2010 etc. ?

    Not complicated enough I suppose, or too similar to Mulroney's short-lived (i.e. only for the rich) capital gains exemption.
  2. Daniel Roy from Toronto, Canada writes: "Safety comes first in this situation, which means you should avoid the stock markets and anything else that could fall in value and thus deplete your account."
    I'm not so sure I completely agree with this statement if you plan on leaving this money at least for a couple of years. The dividend yields out there on some good stocks (banks, utilities, ...) is often much higher than whatever you can get in savings instruments, so that makes the stock market much more attractive, and somehow lowers the level of risk involved.
  3. adam jab from Toronto, Canada writes: I really dont understand what the advantage of a tax free savings account is vs a regular savings account. with the 2-3% interest rate at the end of the year what ever gains you make are lost to inflation.

    The only benefit from putting money into a savings account is felt by the banks which take your money and load it out to other people for rates of 15% or more.

    All savings accounts represent a money grab.
  4. i coffey from Canada writes: I don't agree with this article at all. The potential benefits of a TFSA aren't realized via low-risk low-reward investments. It would be more beneficial to stack your TFSA with the higher risk elements of a portfolio in order to maximize the potential tax savings. Saving tax on a 3% daily interest account would just be wasteful. Now, if someone doesn't have the cash to invest in higher-return vehicles and only has funds for a daily interest account then sure, the ~$50 tax savings is better than nothing...
  5. Charlie L from Vancouver, Canada writes: I think people are misinterpreting the intention of the article here. The article is suggesting for those people who have no emergency savings and dip into their RRSP in case of an emergency should open TFSA to save for rainy days.

    If you already have an emergency savings, then by all means use that TFSA to invest in stocks, ETFs and mutual funds for higher returns and tax benefits.

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