Tax-Free Savings Accounts (TFSAs) were introduced starting January 2009 by the Canadian government to help Canadians save more. TFSAs are very similar to RRSPs, with some differences, notably:
RRSPs > pre-tax dollars contributed & taxable upon withdrawal
TFSAs > after-tax dollars contributed & no tax paid on withdrawals
While most people save for retirement in an RRSP, the TFSA could be used to save for a downpayment on a house, a vacation, a new car, taxes (for self-employed), etc.
TFSAs can be most beneficial to high income earners who have already maxed out their RRSPs and have non-registered investments. TFSAs are also good for those in a lower tax bracket who expect their salary to increase in the future or where the tax bracket is unlikely to change from now to retirement.
We offer TFSAs with segregated fund options. For a more liquid TFSA (for a short-term goal), check with your bank for a high-interest savings account option TFSA.
For more information regarding TFSAs, check out Get Smarter About Money.ca.