What types of tax-free savings accounts (TFSAs) exist? + MORE Nov 29th

Kyle Prevost, creator of 4 Steps to a Worry-Free Retirement, Canada’s DIY retirement planning course, shares financial headlines and offers context for Canadian investors.

Trump tariffs means four years of economic chaos

The Canadian economy found itself in the midst of the Trump economic tornado again this week—again. The first time was from 2017 to 2021 when he was U.S. president, and now as he heads into the role again on January 20, 2025.

With one post on his social platform Truth, the president-elect threw our export-based economy into scramble mode, as our currency dropped 1.2% overnight.

Make no mistake, a 25% tariff on all of Canada’s exports to the U.S.A. would be catastrophic. Many small businesses would go bankrupt, profit margins would be slashed for Canadian companies of all sizes, and our currency would lose a lot of value (thereby increasing inflationary pressures). Overnight—and two months before Trump becomes president—his musings have once again plunged Canadians into despair…

Find out your current tax-free savings account (TFSA) contribution limit by using this calculator.

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Tax-free savings account is a bit of a misnomer. While you can use it for straightforward savings, think of it more accurately as an investment holding account to store things like exchange-traded funds (ETFs), guaranteed investment certificates (GICs), bonds, stocks and, yes, plain old cash. While you do have to abide by the set amount of contribution room each year, any growth you earn on those investments will not affect your contribution room for the current year or years to come. Plus, the income earned is tax-free (more on that below). Any resident of Canada who is 18 or older and has a valid social insurance number can open a TFSA.

sponsoredMCAN Wealth 1-year non-registered GICgo to site

Interest rate: 4.05%

Minimum amount: $1,000

Eligible for CDIC coverage: Yes

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Is a TFSA really tax-free?

TFSA contributions won’t reduce your taxable income and generate a tax refund, unlike registered retirement savings plan (RRSP) contributions…

A tax-free savings account (TFSA) is a fantastic way to earn money on your savings, without having to pay tax on those earnings. Registered by the federal government, TFSAs are available to Canadians aged 18 and older. Unlike a registered retirement savings plan (RRSP), you cannot deduct contributions to your TFSA from your income tax, so you will have to pay income tax on that initial money. But as long as you adhere to TFSA guidelines, you won’t pay taxes on any earnings made within the TFSA, not even when you withdraw it. Plus, you can withdraw as much as you want at any time.

There’s a specified limit to how much money you can put inside a TFSA. For 2024, the annual TFSA contribution limit is $7,000, and for 2025, it will be $7,000. As of Jan. 1, 2024, there is a lifetime maximum of $102,000 for those who were 18 or older as of 2009. The good part is that any unused contribution space and any amount that you withdraw from your TFSA becomes available to you as contribution room in the next calendar year…