Have you gone tax free yet? Tax-Free savings accounts aren't exclusive to ING Direct Canada they are offered at most (if I say all someone will prove me wrong) banks throughout Canada. If you don't have a Tax-Free savings account yet then each year you wait your are throwing away $5000 of savings opportunities! Let's find out more about Canadian Tax-Free savings accounts:
If you are 18 or older you can open a Tax-Free savings account and there are a large number of options available - Savings Accounts, GIC'S, High Interest Savings, Mutual Funds and perhaps more depending on your bank. Which one you choose depends on your individual style of saving but the tax-free element remains the same throughout all tax-free products.
Don't wait! Even if you don't have money for savings this year it's worth at least opening an account. When you open your account you are allowed to deposit a total of $5000 for the year. This is a total deposit amount, not balance! So if you put $4500 in, and later in the year take that $4500 back out, you are only allowed to deposit $500 for the rest of the year. What about that other $4500 of space? It's not lost, however you need to wait until the new year to use it again. Each year your account is open for you will unlock an extra $5000 worth of deposit space! You don't need to use all of it, but it will be there waiting for you, and it won't make a mess on your new rug if you take too long ;)
The interest earned onside a TFSA is tax-free. Its't not such a big deal the first year but as your savings grow larger you'll see the benefits more and more. On thing worth pointing out is what happens if you account goes over the $5000 limit due to interest earned. For example you deposit the full $5000 your allowed for the year into a Tax-Free Savings Account. At the end of the month you receive interest on that money and your account is now $5012.33!! Its $12.33 over but don't worry, interest earned inside the account does not count as a deposit to the account.
There are few more things worth noting. Unlike a RRSP when you decide to withdrawal money from your Tax-Free savings account you won't be taxed on it. The TFSA is truly tax-free. You can have more than one TFSA at more than one bank, however in total you have only $5000 per year of contribution room, not $5000 per account or per bank. You can't take money out of a Tax-Free Savings Account, and deposit into another TFSA! At least not if it means that you will go over your annual contribution limit, also it's not the best thing to do since it will eat away at your remaining limit. If you find yourself wanting to move money from one TFSA to another then you should as your bank about obtaining a transfer form. The transfer form will allow you to move your money without loosing contribution space. It takes a little time but its a much better choice than moving it by hand.
So how does ING Direct Canada play into all this? Well like other banks they offer a variety of Tax-Free Savings Accounts for you to choose from. Unlike some banks ING Direct Canada offers promotions at times giving you you a higher interest rate on their TFISA than they do on their regualar ISA. At the moment there is no promotion but my TFISA was at 2% and the ISA was 1.5%. for some time. Around the new year ING has been having an early contribution event, allowing you to put aside $5000 for the new year and doubling the interest earned on it! It's defiantly worth having both accounts I'd say.
As with the other products offered by ING Direct Canada you can use an orange key to open a tax-free account.
-Sign Up Now at ING Direct.ca (don`t forget to copy an ING Direct Canada Orange Key 33885729S1 )
-See our original post about the ING Direct Orange Key program HERE for more information.
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