My colleagues Ted Menzies, Minister of State (Finance), and Gail Shea, Minister of National Revenue, announced this week that Canadians will be able to save an additional $500 in their Tax-Free Savings Account (TFSA) starting in 2013, raising the annual contribution limit to $5,500.
TFSAs became available in 2009. Since then, Canadians have been able to earn tax-free investment income on contributions of up to $5,000 per year.
TFSAs have become increasingly popular, with approximately 8.2 million Canadians having opened an account and roughly 2.5 million Canadians contributing the maximum amount in 2011.
What makes the TFSA so popular? Here’s the rundown:
• A TFSA is available to all Canadians, 18 years and older
• Any interest, dividends and capital gains earned in a TFSA are not subject to tax
• A TFSA allows you to invest in a number of types of investments, be it a high-interest savings account, mutual funds, guaranteed investment certificates, listed securities, or other types of qualified investment products
• Unused TFSA contribution room is carried forward and accumulates for future years
• Funds available in your TFSA can be withdrawn tax-free at any time for any purpose. You can recontribute withdrawn amounts in the same year only if you have unused TFSA contribution room. Otherwise, you have to wait until the following year
• Income earned in a TFSA and withdrawals do not affect your eligibility for federal income-tested benefits and credits; and
• Contributions to a spouse’s or common-law partner’s TFSA are allowed.
When the TFSA was introduced, the government announced that the $5,000 annual contribution limit would be indexed to inflation in $500 increments.
For 2013, this will be the year when the first $500 increment takes effect, which means more room for Canadians to put funds aside for their financial goals.
The TFSA is a valuable way to save for the future and to save on taxes.
For more information, please go to the Canada Revenue Agency at www.cra-arc.gc.ca/tfsa/.
Most of us make important financial decisions for ourselves and our families.
Whether it is saving for retirement, saving for a child’s education or financing a new home, the range of possible options is growing and financial products and services are becoming more sophisticated.
In 2009, the government of Canada conducted the Canadian Financial Capabilities Survey, which provided insight into the challenges Canadians face when it comes to understanding financial matters.
What resulted was the Task Force on Financial Literacy, which provided recommendations to the federal government on how to strengthen the financial literacy of Canadians.
The Financial Consumer Agency of Canada is playing a key role in this regard. With the dual mandate to protect and educate consumers of financial products, the FCAC delivers a host of online tools and publications, including a web-based program for high school students designed to teach skills integral to financial well-being later on in life.
Also available through the FCAC is Your Financial Toolkit developed in collaboration with a variety of financial education experts across the country, many who work with consumers on a day-to-day basis.
The Toolkit is free online and in paper format by going to the Financial Consumer Agency of Canada (FCAC) at www.fcac-acfc.gc.ca.
I’ve also been informed by the Canadian Bankers Association that they also have a toolkit available to consumers, which helps answer questions such as how to reduce banking fees; help seniors protect themselves from financial abuse and where to seek out help with your debt.
The CBA toolkit is available by going to bankingquestions.cba.ca.
Personal finances, especially at this time of the year with Christmas approaching, can be challenging.
The more information consumers have, the better equipped they are to manage their finances.
As Finance Minister Jim Flaherty said: “Ensuring that Canadians have the tools and knowledge to make responsible financial decisions is important for their personal well-being and for the strength and stability of our financial system as a whole.”
I encourage all constituents to take advantage of these financial tools.