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If you’re using your tax-free savings account solely to deposit cash over the long term, Certified Financial Planner Trevor Kearns says you’re not using the TFSA to its full potential.
You have more options (and better potential gains) than that. Kearns tells many of his clients to mentally drop the “A” in TFSA and to think of it as more of a “portfolio” than an “account.” Many will deposit up to $6,000 per year (or up to $65,900 cumulative contribution, if they’re catching up from previous years), into a registered savings account to benefit from fact their money will earn interest tax-free, and can be withdrawn without penalty. (Also, worthy to note, with a TFSA you can make withdrawals, and if you withdraw enough to bring your balance below the lifetime maximum (or equivalent for your age, if you are younger), you regain that contribution room. You can’t do that with RRSPs.)
Using a TFSA as “a savings vehicle,” Kearns says, “you may make 1% interest…